Overdraft and credit card lending has peaked in the United States while its economy did not grow as anticipated in the 2016 second quarter. The annualized rate came to only 1.2 percent- much below the expected 2.5 percent. This led to concerns that American banks are taking on excess risks in slowing economy.
The banking industry has accumulated approximately $18 billion of total card loans along with other kinds of revolving credit within the space of only three months. Consumers now borrow more and the banks try to woo customers with cash-back deals and air miles along with many other offers.
This increase in lending has come at a time when economists expect the American election to generate uncertainty adequate to impede growth for rest of 2016. This increases lenders’ stake at the time when credit cycle seems to have crossed a peak.
In only three months, approximately $18 billion of debts related to credit cards have been issued. This has prompted fears among lenders that the banks could soon be flooded with bad loans if the economy tanks.
The US shocked the financial world in June with worst job figures from the time of recovery from the financial crisis. This figure went through a recovery in July. A few experts, however, hold the opinion that the US is going on the path to another recession. If this happens, it would be devastating for the world economy.