Tags: credit | card | debt | financial

CardHub: The Good and the Bad of Increasing Credit Card Debt

By    |   Tuesday, 10 March 2015 08:20 AM

Net credit card debt rose $57 billion for U.S. consumers last year, and there's both good and bad in that trend, according to credit card research site CardHub.

As an indicator of spending and household financial health, the increase "supports the notion of a rapidly improving economy," according to the report.

A drop in defaults "indicates that consumers have the financial wherewithal to remain current on their obligations," the survey says. "That's the good news."

And what's the bad news?

"While economic gains are making our spending habits sustainable for now, attitudes toward debt have not improved since the Great Recession," the study states.

"We've now had six consecutive quarters of year-over-year increases in our credit card debt load. As a result, we must strive to remember the corrosive impact of debt on household finances during the recession" and work to cut the burden.

U.S. consumers incurred $45.5 billion in credit card debt during the fourth quarter alone.

Looking at debt more broadly, from 2007 through the second quarter of 2014, global debt grew by $57 trillion, raising the global debt-to-GDP ratio by 17 percentage points to 286 percent, according to the McKinsey Global Institute.

The endgame of this global cesspool won't be pretty, says Jeremy Warner, assistant editor of The Daily Telegraph. "The world is sinking under a sea of debt, private as well as public, and it is increasingly hard to see how this might end, except in some form of mass default," he writes.

And it won't just be sovereign nations, but the corporate sector as well, Warner says.

"You might have thought that a financial crisis as serious as that of the past seven years would have ended the world economy's addiction to debt once and for all. It has not. If anything, the position has grown even worse since the collapse of Lehman Brothers [in 2008]."

Governments in advanced economies have borrowed heavily to fund bailouts and boost demand. Private sector debt also has climbed rapidly in many countries.

The massive debt burden makes the global economy very vulnerable to financial crises, Warner maintains.

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Net credit card debt rose $57 billion for U.S. consumers last year, and there's both good and bad in that trend, according to credit card research site CardHub.
credit, card, debt, financial
351
2015-20-10
Tuesday, 10 March 2015 08:20 AM
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