WASHINGTON—Another report indicates that borrowers and lenders may be forgetting part of what led to the Great Recession.
CardHub’s 2015 Credit Card Debt Study shows consumers racked up an “astounding” $52.4 billion in credit card debt during the fourth quarter of 2015. The full CardHub report can be found here.
That significant build-up nearly equals the total amount added to borrowers’ collective tab in 2014 ($57.4 billion) and leaves the U.S. with a $71-billion net increase in credit card debt for 2015.
As a result, the average household with credit card debt now owes $7,879, what CardHub asserts is “perilously close” to a tipping point at which balances become unsustainable and delinquency rates skyrocket.
Those factors, said CardHub, could lead to a considerable constriction in credit availability. “All of this has us wondering: Is 2016 the next 2008 for credit markets?,” the analysis stated.
Adding up the $7,879 household credit card debt places U.S. cardholder debt above $900 billion—a mark last breached in 2007 during the ramp up to the financial system’s 2008 collapse, CardHub explained.
“If we don’t get a record-setting debt paydown during the first quarter of the year—when consumers typically get tax refunds and annual salary bonuses—and we continue to add debt at this rate, it won’t be long before default rates begin to rise and credit availability tightens,” CardHub explained.
CardHub pointed out that 2015 started with promise, as consumers used tax refunds and annual salary bonuses to repay nearly $35 billion in credit card debt over the year’s first three months.
“But we quickly erased our gains with the largest second, third and fourth quarter binges since CardHub began conducting this study in 2009,” CardHub said. “We ended 2015 with a $71-billion net increase in credit card debt, largely because we incurred nearly as much new debt during the fourth quarter of the year as we did during all of 2014.”
Other key study findings:
- The $52.4 billion in new credit card debt added in Q4 2015 is the largest fourth-quarter buildup since the Great Recession – 283% higher than the post-recession average.
- * Borrowers added more than twice as much credit card debt to their tab in the fourth quarter of 2015 than the third quarter, and the amount incurred during this three-month binge almost equals the 2014 total. “In fact, during this one quarter, we added more debt than in 2009, 2010 and 2011 put together,” CardHub stated.
- With eight of the past 10 quarters reflecting year-over-year regression in consumer performance, evidence is mounting to support the notion that credit card users are reverting to pre-downturn bad habits.
- While credit card debt levels are trending significantly upward, charge-off rates remain near historical lows and are, in fact, down on a year-over-year basis. “Something clearly has to give, and it does not seem to be our spending habits,” CardHub said.