Report: Consumers racked up $77 billion in credit card debt in 2019

U.S. consumers racked up $77 billion in credit card debt in 2019, an all-time high, according to a report published by the personal-finance website WalletHub.

Its 2020 Credit Card Debt Study, based on a nationally representative 2020 Debt Survey, “is worrisome nationwide,” WalletHub says.

“Although the forecast initially appeared brighter, thanks to consumers repaying $38.2 billion in credit card debt during Q1 2019, poor second-quarter results nearly erased that effort,” the report states.

“U.S. consumers added $35.5 billion in new credit card debt during the second quarter of 2019 – the largest second-quarter build-up ever. And in the third and fourth quarters, total debt went up by another $21.5 billion and $57.9 billion, respectively. As a result, there was a $76.7 billion net increase in consumer credit card debt for 2019 overall.”

WalletHub projects an $85 billion net increase in credit card debt in 2020 – which would means Americans approach owing $1.16 trillion in balances by year’s end.

Since the end of the Great Recession, consumer performance has regressed on a year-over-year basis in 6 of every 10 quarters. The average household’s credit card balance of $9,070 is a mere $1,050 below WalletHub’s projected breaking point.

The report compares the amounts owed to credit card companies by residents in more than 2,500 U.S. cities – specifically comparing how balances changed.

California residents with the biggest debt increases in 2019 lived in La Mirada, Martinez and Menlo Park. California residents also made the largest debt pay downs in 2019, living in Encinitas, Moorpark, and Dana Point.

The report identified trends by age, political affiliation and gender. Roughly 37 percent surveyed said they would do anything to get out of credit card debt.

The report found that younger people are more likely to go into credit card debt (by 27 percent) for frivolous purchases than people over age 59. Millennials are also three times more likely than baby boomers to agree to house arrest for a year in exchange for credit card debt freedom.

It also found that recession fears widely vary depending on a resident’s political affiliation. More than twice the number of Democrats than Republicans believe a recession will occur in one year.

WalletHub CEO Odysseas Papadimitriou says that the U.S. is “in a very unhealthy, precarious position concerning revolving debt at the household level and perhaps the economy overall.”

The increase of an estimated $85 billion in credit card debt in 2020 will “push the average household’s balance to $9,755 and bring our collective credit card debt to roughly $1.16 trillion,” Papadimitriou added. “Credit card debt levels are so high now that even a big increase can seem like a drop in the bucket. For context, $1.16 trillion is roughly three times as much as the federal government will spend on net interest payments toward the national debt this year.”

Despite recent interest rate cuts by the Federal Reserve, Papadimitriou says, “because regular credit card rates are already so high compared to other types of debt, a Fed cut or two certainly won’t be enough to solve the credit card debt problem.”

The personal-finance site suggests that the best balance transfer credit cards currently offer 0 percent APRs for the first 15-21 months with no annual fee and balance transfer fees as low as zero.

WalletHub also produced a guideline to help consumers better manage their income and debt. It suggests consumers create a budget and stick to it, plan to pay down debt every month to determine a date they can become debt free, and re-evaluate expenses and streams of income.

The report was based on the latest data available from TransUnion and the Federal Reserve.

This article was first published by The Center Square.

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