US credit card debt hits record
Experts say level doesn’t mean crisis but may be warning sign
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.