When you have too much credit card debt, it speaks volumes about other areas of your finances. Basically, either you’re not earning enough to support your lifestyle or your expenses have ballooned in ways you didn’t see coming.
Either way, it’s a bad sign, and experts predicted a coming rise in bankruptcies at the start of 2018. That’s because Americans’ credit card debt topped $1 trillion for the first time in history.
According to a March 2018 WalletHub survey, the nation’s debt load is resembling the situation prior to the Great Recession. Between the raw numbers and this consumers’ report, there are several scary trends to note about Americans’ credit card debt.
1. Americans hold an average balance of $8,600 on credit cards.
Between 2016 and 2017, average debt per household rose $469, to a total of $8,600. This figure was a record, and sits well above the levels finance experts consider sustainable.
Historically, you’d need to go back to the end of 2007 — the eve of the Great Recession — to find the closest figure ($8,400).
Next: Over half of Americans can’t pay off their debt in a year.
2. Only 41% believe they can pay off their debt by 2019.
While 9 in 10 Americans surveyed said they’ll have less debt within a year, 52% said they’ll need closer to two years or more to be debt-free. Since interest rates are rising, payments will be higher than many people forecast.
In other words, a majority of Americas don’t know how much they’ll owe in 2019.
Next: Debt among those with poor credit is soaring.
3. Americans with poor credit saw card debt jump 26% since 2015.
The Consumer Financial Protection Bureau (CFPB) released its two-year study in December 2017. Over the preceding two years, Americans with “deep subprime” credit scores (below 580) increased balances by 26%.
Compared to the average (9%), you can see a part of the population headed for financial trouble in what is considered a booming economy.
Next: Many Americans have no idea how they got into debt.
4. A surprising number of people don’t know where the debt came from.
WalletHub’s survey revealed 13% were unable to say where the debt they held came from. That’s quite a figure when we’re talking about a number exceeding a trillion dollars.
If they don’t know how it happened to begin with, it’s unlikely they’ll be able to avoid more of the same in 2018.
Next: Americans’ savings are at a 10-year low, making for a bad combination.
5. Meanwhile, savings reached a 10-year low.
Looking at the annual trends in credit card debt, you see a familiar pattern. At the end of the year, with Christmas presents and holiday events running up big tabs, people spend the most. During the first quarter of every year, the debt load falls.
Normally, that system would work out fine. However, in this case, with Americans’ savings at a 10-year low, it’s less likely to happen.
Next: New debt from late 2017 ran near $70 billion, making pre-recession charges seem conservative.
6. Americans added a record $67.6 billion in credit debt late in 2017.
While Americans were watching their savings disappear, they added $67.6 billion in new charges at the end of 2017. Taken with the plunge in money per account, it’s fair to ask how people will pay down the debt.
According to WalletHub, that new debt was 68% higher than the average quarter during the Great Recession.
Next: Millions of Americans expect to die in credit card debt.
7. 31 million think they’ll die in debt.
A YouGov survey for Creditcards.com revealed 31 million Americans believe they will die with credit card debt. Whether you expect to live your final years in comfort or hope to avoid passing on debt to children, this statistic is a depressing one.
For those who refuse to accept this fate, there are several steps to take.
Next: How to avoid the hopelessness of debt
8. Avoiding the trap of credit card debt
Considering we keep hearing about a booming U.S. economy, everyone would do themselves a favor by putting away money now — so you have it when the economy takes a downturn. Otherwise, interest fees and some unexpected expenses could lead you into a downward spiral.
Likewise, consumers do themselves a favor when they know the interest rate of each credit account. By paying off the highest rates first, you have the greatest chance of getting out of debt.
Most importantly, ignore news about how well everyone is doing. When the stock market drops or something else unexpected happens, the only bank account that matters is your own.
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