Consumer Credit Card Debt Rises

Is it a good thing or a bad thing for the economy when America’s total credit card debt grows? According to a recent article in the Wall Street Journal, more credit card spending is typically “a sign of a rebound in consumer spending after a sluggish winter,” and thus a good thing for the economy. But, can too much credit card debt become a problem? Will current spenders need to think about filing for consumer bankruptcy in the near future?
Billions in Credit Card Debt
When the Federal Reserve talks about the total outstanding consumer credit, they are referring to all debt outside of home loans or mortgages. Based on recent calculations, Americans’ total credit card debt rose by almost 8% in March, and economists “had expected consumer debt to rise $16 billion in April.” The number actually outpaced those economists’ expectations, however, as it jumped by “a seasonally adjusted $20.54 billion in April,” which reflects a 7.33% surge.
While credit card debt rose, non-revolving credit dipped. Non-revolving credit refers to money borrowed to pay for a new car or higher education, for example. That type of debt only rose by 5.8% in April, which reflects the “slowest pace” of this type of spending “since July 2012.”
Why does more spending on credit cards mean that the economy is picking up? Many Chicago residents assume that credit card spending is a bad thing—if you’re buying on credit, you could be heading toward a financial disaster. However, as the Wall Street Journal explains, “when consumers rein in spending . . . the economy typically slows.” Typically, when credit card debt picks up, economics view it as “a sign Americans are gaining confidence and feeling more secure.”
At the same time, we should take a closer look at the type of credit card debt that is on the rise. A report in Nasdaq.com emphasizes the significant difference between “transactors” and “revolvers.” For the latter, growing credit card debt could be a sign of financial difficulties that could lead to bankruptcy.
How Credit Card Balances Affect Financial Health
What is the difference between a transactor and a revolver? While these words might sound like meaningless lingo, they refer to two different kinds of credit spenders. Transactors are people who use their credits cards regularly but pay off their balances each month before accruing any interest fees. Revolvers, differently, are those people who carry balances on their credit cards and often end up paying hefty interest fees.
What type of person is responsible for the recent increase in credit card debt? It is important question, since credit card growth, economists explain, “could also be a sign money is tight for many households and they have few other options than to borrow.” Experts indicated that transactors account for a large percentage of the rise in credit card debt. In other words, people who charge and then pay off their cards each month tend to be the ones that are driving up the total amount of reported spending.
It is important to pay attention to these trends and to think carefully about charging purchases on credit cards. Credit card debt is frequently cited as one of the primary reasons that Chicago residents file for consumer bankruptcy. If you have questions about handling creditors or filing for bankruptcy, you should always discuss your case with an experienced Oak Park consumer protection lawyer.
See Related Blog Posts:
Credit Card Debt Low, Affects Bankruptcy Filings
Personal Bankruptcy and America’s Seniors

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