Here's some news that anti-debt crusader Dave Ramsey would not be happy about. After cutting their credit card debt for about two years, American consumers have taken an abrupt move back into the red.
According to a new study by analysts at CardHub, the total net increase in outstanding credit card debt in 2013 climbed to $38.2 billion, an increase of 8 percent over 2012. The study also predicts this will continue, with new debt for 2014 increasing by $41.2 billion.
Other Study Findings:
- $42 Billion – The amount of credit card debt that U.S. consumers accumulated in Q4 2013 alone. This represents a 5% increase relative to Q4 2012. The fourth quarter debt increase exceeds that for 2013 overall due to the fact that we actually paid off $32.6 billion during the first quarter of the year. We then proceeded to wipe out that paydown, and then some, throughout the rest of the year.
- $6,971 – The average household’s credit card balance.
- $267 Billion – The amount of credit card debt that consumers have defaulted on in the past five years – a boon for collection agencies, to say the least.
- 16.7% – The credit card default rate declined 16.7% in 2013 and is now approaching historical lows. A reversal in this trend could lead to a significant credit crunch.
“Context is extremely important when it comes to evaluating credit card debt trends,” CardHub CEO Odysseas Papadimitriou said of the report’s findings. “One could easily come to the conclusion that 2013 was a healthy year for consumer spending given the fact that outstanding credit card debt increased only $10.4 billion while defaults fell 16.7%. But that would fail to take into account the $27.7 billion that we defaulted on, yet still owe. As has been the case in recent years, the first quarter of 2013 was the only one in which we paid down debt.”