Consumer Credit Card Debt on the Rise

How should we interpret the fact that consumer credit card debt is on the rise in the Chicago area and across the country? According to a recent article in MarketWatch, more people are going into credit card debt, and the total amount is expected to reach $1 trillion by the end of the year. Why are more people spending on credit cards than they were in recent years?

In short, since the economy has been improving, more consumers feel confident spending on credit. However, that does not necessarily mean that they are paying their balances in full—or even making minimum required payments on a monthly basis. As the article highlights, if consumers continue to spend but fail to pay off at the current rate, “U.S. households will accumulate $1 trillion in outstanding debt by the end of 2016,” which is “the most ever.”
Should consumers be worried about spending on credit? And should some of those debtors think carefully about whether consumer bankruptcy may be able to help with unmanageable debt?
Consumers Paying Off Less and Less Debt
When the article says that fewer consumers are paying off their credit card debt, what exactly does that mean in terms of numbers? In the first quarter of this year, “consumers only paid $26.8 billion in credit card debt, which is 38% of the $71 billion added during 2015.” If you are not sure how that compares to other years, it is the smallest reduction of debt during the first quarter that we have seen since 2008, and it is “nearly 25% below the post-recession average.” Does this mean that consumers who carry balances on credit cards may end up with a debt load that ends up being difficult to control?
Some experts think the higher amount of credit card debt may signal that there is a problem. While more credit card spending, on the whole, typically means that consumers feel that their jobs are secure and that the economy is faring well, it can be very difficult to pay off thousands of dollars in credit card debt when you carry a balance and only make the minimum monthly payment.
Carrying Balances and Unexpected Life Events
If you make purchases on your credit card and carry a balance (in other words, if you do not pay off the credit card in full each billing cycle), it is not necessarily a sign of impending financial doom as long as you have job security. However, as the article makes clear, problems tend to arise when consumers who are carrying credit card balances have unexpected life events arise.
For example, if you are carrying a $5,000 balance and making only the minimum monthly payment (and thus having interest accrue, adding to your balance), what happens if you have a major medical issue and need costly care? Or, what will happen if you lose your job? Economists cite these potential issues as just a couple examples of how credit card debt can lead to larger financial problems.
Contact an Oak Park Bankruptcy Lawyer
If you are struggling with credit card debt, you may have options for some relief. An experienced bankruptcy attorney in Oak Park can speak with you today. Contact the Emerson Law Firm for more information.
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