US credit card debt hits record

Ex­perts say level doesn’t mean cri­sis but may be warn­ing sign

Milwaukee Journal Sentinel - - Milwaukee Wisconsin - Paul David­son USA TO­DAY

Amer­i­cans’ out­stand­ing credit-card debt hit a record in Novem­ber, high­light­ing a more con­fi­dent U.S. con­sumer but also flash­ing a warn­ing sig­nal of po­ten­tial trou­ble down the road.

Re­volv­ing credit, mostly credit cards, in­creased by $11.2 bil­lion to $1.023 tril­lion, the Fed­eral Re­serve said. That nudged the fig­ure past the $1.021 tril­lion high-wa­ter mark reached in April 2008, just be­fore the hous­ing and credit bubbles burst. Over the past year, re­volv­ing credit has surged by $55.1 bil­lion, or 5.7 per­cent, ac­cord­ing to the Fed and Con­tin­gent Macro Re­search.

Non-re­volv­ing credit, such as auto and stu­dent loans, rose by $16.8 bil­lion to $2.8 tril­lion in Novem­ber.

The all-time-high for credit-card debt doesn’t pose the risks to the econ­omy that ex­isted in 2008 be­cause in­comes are higher, UBS Credit Strate­gist Stephen Caprio said.

The ra­tio of credit-card debt to U.S. gross do­mes­tic prod­uct is about 5 per­cent, com­pared with 6.5 per­cent in 2008, he said.

“It’s a po­ten­tial early warn­ing sign but not a fi­nan­cial sta­bil­ity is­sue” for the broader econ­omy, Caprio said.

Still, Caprio noted that credit-card delin­quen­cies have in­creased to about 7.5 per­cent from 7 per­cent a year ago, un­der­scor­ing grow­ing stresses for low-in­come house­holds in par­tic­u­lar. While that’s still be­low the 15 per­cent delin­quency rate reached dur­ing the fi­nan­cial cri­sis and the 9 per­cent his­tor­i­cal av­er­age, he said the in­crease over the past year raises some con­cerns. With jobs and in­come grow­ing, the rise isn’t cre­at­ing sig­nif­i­cant prob­lems now but could if the econ­omy and la­bor mar­ket take a down­ward turn.

“Peo­ple should make 2018 the year they fo­cus on knock­ing down their credit-card debt,” said Matt Schulz, se­nior in­dus­try an­a­lyst for Cred­itCards.com. With the Fed­eral Re­serve con­tin­u­ing to raise in­ter­est rates, “that credit-card debt is go­ing to grow faster and faster,” si­phon­ing off money Amer­i­cans should be putting aside for re­tire­ment,” Schulz said.

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