Consumer Debt: Nothing But Bad News for Americans and the Economy



Americans are in debt — a lot of debt, which is hardly surprising for a nation with such emphasis on consumerism, but highly problematic in terms of personal finance. Whether it’s credit card debt, leftover college debt, or other sources, most households in the U.S. are working with some sort of weight chained to their personal finances.

The Federal Reserve Bank of New York released data in February that showed American consumer debt has risen higher than it’s been since 2011, totaled at $11.52 trillion. This is up 2.1 percent form the third-quarter of 2013, the greatest increase seen since the third-quarter of 2007. While debt is still staying well below it’s highest point in 2008 at the time of the financial crisis — 9.1 percent below — personal debt is still concerning when you consider the stats. According to Business Insider, one in ten consumers had over ten credit cards in 2010, while the average individual had four, with each household dealing with an average of $6,500 worth of debt. Over 2 million households is dealing with over $20,000 worth of credit card debt.

Even more concerning is that 28 percent show credit card debt over that which they have held in their savings account, with only 51 percent having more in savings than they have in credit card debt. “This is not moving in the right direction,” Greg McBride, chief financial analyst at — which provided the numbers — told Time. “American consumers are not showing improvement in these areas,” hes said.

Of course, consumer debt isn’t always a bad thing. In terms of economic indicators, willingness to go into debt can suggest consumer confidence and improved economic stability. But debt can also mean the exact reverse; those with heavy credit card or university deficits may be unwilling or incapable of investment in the housing market, buying a new car, and so on. Part of what determines this is economic health, because as usual, cause and effect is somewhat cyclical in economics. With a strong economy and healthy economic growth, getting out of debt is also easier, so going into debt has less negative effects on your ability to spend and invest in economy stimulating expenses. With a strong economy, job security is higher, home ownership is more likely to increase in value, paying off college educations becomes more doable with higher quality employment post-graudation, and so on.