STOCK MARKET WATCH -- Monday, 15 September 2014

[Demeter]

22. American credit-card debt hits a post-recession high

https://secure.marketwatch.com/story/american-credit-card-debt-hits-new-highs-2014-09-11?dist=tbeforebell

U.S. consumers may be relying too heavily on their plastic.

Americans added $28.2 billion to their credit cards in the second quarter of 2014, the largest amount in the last six years and nearly 200% more than in the second quarter of 2009, when the economy emerged from the depths of the Great Recession, according to new research from personal finance website CardHub.com. After paying off $32.5 billion owed during the first quarter of 2014, consumers ran up roughly 86% more debt during the following quarter.

The average household’s credit-card balance now stands at $6,802, up slightly from $6,628 in the first quarter, but still down from $8,431 at the end of 2008. By the end of the year, this figure is expected to exceed $7,000, reaching levels not seen since the end of 2010. U.S. consumers will be roughly $1,300 away from the credit card debt “tipping point,” where minimum payments become unsustainable and delinquencies skyrocket, the report says.

Experts say that consumer spending accounts for more than two-thirds of U.S. economic output, and credit-card spending in particular shows that people are feeling more confident about their job security and the economic recovery. Earlier this week, the U.S. Federal Reserve said that outstanding revolving credit, which is mostly made up by credit-card debt, increased by 7.4% in July to $880.54 billion, and has been gradually rising since falling to $840 billion in 2010.

Americans are certainly using their credit cards more, says Ben Woolsey, president of credit-card advice website CreditCardForum.com. Following the financial crash, banks charged off lots of balances as uncollectable, reigned in credit lines and greatly curtailed new account signups due to a freeze in the credit markets, he says. “Average figures are greatly distorted by a relatively small percentage of borrowers who carry lots of debt and therefore render any conclusions more alarmist,” Woolsey says.

But some Americans are living beyond their means: 20% of people say could not make ends meet without the use of credit and 22% say they would have to make “significant lifestyle changes” if they cut up their credit cards, according to a new poll of 1,878 credit-card users by the National Foundation for Credit Counseling. “Breaking one of the basic rules of personal finance — spending more than you make — is not likely to have a positive outcome,” says Gail Cunningham, spokeswoman for the NFCC.