Do Americans Have a Credit Card Problem Again?
Life + Money

Do Americans Have a Credit Card Problem Again?

© Stelios Varias / Reuters

Several reports this week paint opposite pictures of the state of credit cards in the U.S. One says credit card debt is close to becoming unsustainable, while a second forecasts historically low default rates.

CardHub, a credit card comparison site, projects that the amount of credit card debt the average American household carries will exceed $8,000 by the end of the year, marking the highest level since the Great Recession.

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Consumers added $23.1 billion in new credit card debt in the third quarter, 34 percent more than last year in the same time period and the highest third-quarter total since 2009. That puts Americans on track to close out the year with more than $900 billion in outstanding credit card debt, the highest since the recession. 

The report says consumers are falling back on bad spending habits they had before the financial crisis and warns that a volatile global economy and imminent interest rate hikes could strain American households.

The amount of debt Americans have accumulated is “putting us perilously close to a tipping point at which balances become unsustainable and delinquency rates skyrocket,” the report says.

But not so fast. TransUnion, the credit reporting agency, doesn’t expect serious delinquency rates to inch up at all next year, according to its 2016 forecast released this week. 

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Delinquency rates will remain at 1.46 percent at the end of next year, or nearly half of what it was in 2009 at the height of the recession. TransUnion notes that low rates persist even as more Americans with varied credit histories get new credit cards. There were 368.8 million credit card accounts at the end of the third quarter, up four percent from the same period last year.

Consumers are managing the new credit card debt responsibly, Ezra Becker, TransUnion’s vice president of research and consulting, said in a statement. “In short, these are the hallmarks of a credit market that is functioning extremely well,” he said.