On Credit Card Debt and why you'll hear more about it this election

[Johnny2X2X]

First, credit card debt going up isn't a good thing, no one will say that. But you have to look at the data in context too.

Second, The economic indicators are all good to great right now, Republicans don't have a line of attack on the economy that works anymore, so you're seeing them excusing the good economy by saying, "It's all just people running up their credit cards." Consumer spending went up 1% last month, so you heard some of that harping on credit card debt from the Right.

Well, credit card debt is up since 2019 (before the pandemic), but it's not skyrocketed like they will try to say, it actually went down during Covid.


It's up about 12% since 2019. Incomes are up over 25% since then, so it's not like most people are going broke so they're using crdit cards to live on.

Some more points.

"Card debt has indeed surged in nominal terms, but after adjusting for inflation, it’s nearly 20% below a peak it reached in late 2008, according to a WalletHub analysis of New York Fed data. Americans also seem equipped to deal with their balances, economists say.

“Consumers still have a lot of money left over to be able to spend, so the credit card data is often misinterpreted,” Russell Price, chief economist at Ameriprise Financial, told CNN. “The dollar value of credit-card debt is at an all-time high, but so is population, employment and consumer income.”"
https://www.cnn.com/2024/02/25/economy/stocks-week-ahead-credit-not-alarming/index.html

Since the FED has been tracking credit card dept as a percentage of overall consumer household debt, the average credit card debt is about 3.73% of total debt. Despite the recent rise in credit card debt, we are currently sitting comfortably under the long term average.

Only half of all Americans have credit card debt. https://www.bankrate.com/credit-cards/news/credit-card-debt-survey/

According to the NY FED, Card debt has indeed risen in nominal terms, but after adjusting for inflation, it’s nearly 20% below a peak it reached in late 2008. https://www.cnn.com/2024/02/25/economy/stocks-week-ahead-credit-not-alarming/index.html#:~:text=Card%20debt%20has%20indeed%20surged,with%20their%20balances%2C%20economists%20say.

The dollar value of credit-card debt is at an all-time high, but so is population, employment and consumer income.

Now seriously delinquent credit cards is a problem and it's over 10% right now, but we really don't have a crisis. And credit card debt is nuanced and not a major economic indicator for a reason. It's just the last thing left in the economy that Republicans can complain about. Just some context and data to answer that line of attack.

[MichMan]

1. Of course, it was higher in 2008 when we were in a recession.

"Card debt has indeed surged in nominal terms, but after adjusting for inflation, it’s nearly 20% below a peak it reached in late 2008, according to a WalletHub analysis of New York Fed data. Americans also seem equipped to deal with their balances, economists say.

Given that incomes are up, and unemployment is at very low levels, just why would people be using credit cards, and paying exorbitant interest rates?

[Blue Full Moon]

6. The usury rates

Of 33% and more was signed into law by Bush jr. Consumer Protection Act. Should have been named Corporation Protection Act.

[WarGamer]

2. incomes aren't up 25% for EVERYONE.

Especially the 50%+ who rate the economy as bad...

PLUS... natural human emotions go like this.

"I get a raise at work because I bust my ass.

I pay more at the grocery store and daycare so I can't get ahead... the man steals my money"

[Johnny2X2X]

3. No, not everyone, same as always

But the raises have been robust and across the board. In fact the people who saw the biggest raises were the lowest wage earners. While not everyone is Doing better, just like every economy, more people are doing better now than before Covid.

[MichMan]

4. What would be the reason to pay 15-25% interest charges ?

If you had the money to pay cash. If anything, people would be using the extra money to pay them down.

Doesn't make financial sense.

[Johnny2X2X]

5. People spend their limit

5% of people in the US are late in payments. Credit card debt naturally goes up with the economy.

I am an evangelist against credit card debt, but it’s how a lot of people run their finances.