WalletHub, the personal finance site, has discovered that balances on credit cards may exceed $1 trillion. This would be a net rise of approximately $80 billion in 2016. The company regards this trend as “ominous”. Consumers added a huge $34.4 billion in the second quarter of 2016. This marks the second biggest increase for that identical period since 2007. The company says, as per the figures, the median debt for every household will be approximately $8,500.
The balance of an indebted household went up to reach $7,817 in second quarter. This is only $611 less than a level which WalletHub has discovered to be unsustainable. Relatively easy obtainable credit makes the situation eerily similar to what was present in the United States’ 2007 second quarter- a few months prior to the beginning of Great Depression.
If one goes by WalletHub, the present bad debt or charge-off rate is about 3.13 percent. This fugure comes short of 3.85 percent rate during the 2007 second quarter. The extra debt of $34.4 billion in second quarter is much more than the 2007 debt of $31.1 billion. Americans have also totted up a $912 billion- more than 2007 era $898 billion. The researchers had note that 13 of recent 20 quarters mirrored year-over-year regression when it came to consumer performance. There is ample evidence that the US scenario is reverting to the bad habits of yester-years.
It has been observed that any year’s third quarter has witnessed historically low points, including credit card debt. The maximum additions to the credit card balance have occurred in the fourth quarter, also the holiday season. The third quarter addition in 2015 was about $21.3 billion. It surged in fourth quarter to make a new debt total of $52.3 billion. This is approximately 70 percent of the total addition in 2015 to the credit card debt.
The current state of affairs is made worse by the fact that consumers paid only $27.5 billion during first quarter in debt that was due to credit cards. This is the lowest pay down in first quarter since 2008. According to a WalletHub report, it is not a query of the financial condition of consumers, but the length of time as to how long this trend of pre-recession splurging habits will continue. There is also the query of how bad it can get.