Posted by: Alina Comoreanu

Credit card debt statistics speak to the financial health of American households. And they can foretell overleveraging bubbles that may trigger constriction across lending markets. From that perspective, the $89.4 billion in new credit card debt that we added to our tab in 2016 represents serious cause for concern. And the fact that we repaid $31.5 billion of our debt during the first quarter of 2017 actually provides little reason for comfort.

First-quarter debt reduction is customary because people generally receive annual salary bonuses (and make New Year’s resolutions) early in the year. And while this year’s Q1 payment was 14% higher than the previous year’s, that is still nearly 9% shy of our effort in 2015.

The months to come will be especially telling, as this mediocre first-quarter performance comes on the heels of a number of low-water marks set in 2016. We started the year with the smallest Q1 paydown ($27.6 billion) since 2008. And we finished it by setting post-2007 records for the most debt added in a second, third and fourth quarter, respectively.

So it is not a question of whether consumers are weakening financially, but rather how long this trend toward pre-recession habits will last and just how bad it will get. And WalletHub projects that we will end 2017 with more than $60 billion in new credit card debt. That would mean we’d owe well over $1 trillion in credit card debt overall.

1. Main Findings
2. Average Credit Card Debt per Household
3. Tips for Managing Debt
4. Raw Data

Main Findings

Outstanding credit card debt is at the second-highest point since the end of 2008 and remains on a collision course with the $1 trillion mark.

The $31.5 billion in credit card debt that we repaid in Q1 2017 is 5% below than the post-Great Recession average.

We ended 2016 with $89.4 billion in new credit card debt, most for a year since 2007 and 145% above the post-recession average.

This first-quarter pay down covers just 35% of the $89.4 billion that we added to our tab in 2016.

 

With 13 of the last 21 quarters reflecting year-over-year regression in consumer performance, it’s clear that we’ve reverted to pre-downturn bad habits.

The fact that charge-off rates remain near historical lows continues to fuel lenders’ appetites for extending credit, but there will be a tipping point eventually.

Average Credit Card Debt per Household

Stat	Q1 2017	Q1 2016	Percent Change
Average Credit Card Debt per Household	$8,038	$7,597	+6%
Total Credit Card Debt	$940.20 billion	$885.40 billion	+6%
Quarter Net Increase	-$31.50 billion	-$27.60 billion	+14%

 

Tips For Managing Debt

1. Make a Budget (and Stick to It): It’s difficult to spend within reason or plan savings without knowing how your monthly spending compares to your take-home as well as what it is allotted to. That is why you should rank order your expenses – including debt payments, emergency fund contributions, and other savings – and trim the fat if necessary. And most importantly, once you develop your budget, make sure to stick to it or else you’ll have simply wasted your time.
2. Build an Emergency Fund: With a robust financial safety net, you’ll be less at the mercy of the economy and able to withstand a prolonged period of joblessness, should the need arise. Your goal should be to gradually save about a year’s worth of after-tax income through monthly contributions to an emergency account.
3. Improve Your Credit: This might sound a bit counterintuitive, considering that increased access to credit provides more opportunity to incur debt, but improving your credit standing will have a dramatic impact on the cost of your debt and, thus, how quickly you can pay it off. Better credit can also make it easier to find a job or a place to live – both of which impact your bottom line.

   You can determine your starting point and get personalized advice by signing up for WalletHub, which provides free credit scores, full credit reports and various other helpful tools.

4. Try the Island Approach: The Island Approach is a credit card strategy that involves using different cards for different types of transactions, as if they are a chain of distinct yet interrelated islands. For example, you could transfer your existing debt to a 0% credit card in order to reduce your monthly payments as well as get out of debt sooner and subsidize your ongoing spending with a rewards card or two that offer high earning rates in your biggest expense categories. This will enable you to get the best possible collection of terms as well as gain a better perspective on your spending and payment habits since finance charges on your everyday spending cards will signal a need to cut back.
5. Use the Snowball Method to Strategically Pay Off Amounts Owed: In order to become debt free at the least possible cost, you should attribute the majority of your monthly debt payment to the balance with the highest interest rate while making the minimum payment required on the rest. Once your most expensive debt is paid off, repeat the process as necessary with the remaining balances.
6. Evaluate Your Job Situation: In some cases, all the budgeting and planning in the world won’t be enough to solve your debt problems. You may therefore need to evaluate whether there are higher-paying opportunities out there for people with your background or if you’ll need to acquire some new skills in order to make yourself more marketable. This might require making a bit of an investment in yourself, but as long as you get a worthwhile return it’s money well spent.

Raw Data

 Net Result of Consumer Credit Card Debt Q1 2008 – Q4 2016

	Net Result in Debt Load	Relative to Same Period Last Year	Relative to Same Period Two Years Ago
2016	$89,151,904,244	26%	50%
2016 Q4	$60,374,186,530	15%	30%
2016 Q3	$21,920,479,046	3%	34%
2016 Q2	$34,391,613,929	7%	20%
2016 Q1	-$27,534,375,261	-21%	-14%
2015	$70,951,951,978	19%	78%
2015 Q4	$52,313,870,333	13%	21%
2015 Q3	$21,308,427,104	30%	78%
2015 Q2	$32,185,674,555	12%	88%
2015 Q1	-$34,856,020,014	9%	7%
2014	$59,437,039,461	49%	65%
2014 Q4	$46,390,173,092	8%	15%
2014 Q3	$16,391,781,226	37%	30%
2014 Q2	$28,703,814,866	67%	63%
2014 Q1	-$32,048,729,723	-1%	-7%
2013	$39,818,136,606	11%	-15%
2013 Q4	$43,121,201,588	7%	-2%
2013 Q3	$12,002,840,611	-5%	-26%
2013 Q2	$17,150,299,307	-3%	-11%
2013 Q1	-$32,456,204,899	-6%	-0.3%
2012	$35,993,426,887	-23%	1355%
2012 Q4	$40,184,825,138	-9%	56%
2012 Q3	$12,577,605,261	-23%	126%
2012 Q2	$17,610,195,184	-9%	83%
2012 Q1	-$34,379,198,697	6%	-11%
2011	$46,978,099,807	1799%	5623%
2011 Q4	$43,937,757,550	71%	95%
2011 Q3	$16,240,553,843	192%	35%
2011 Q2	$19,363,884,656	102%	106%
2011 Q1	-$32,564,096,243	-15%	-27%
2010	$2,473,689,486	391%	-96%
2010 Q4	$25,738,332,310	14%	-29%
2010 Q3	$5,558,050,211	-54%	-59%
2010 Q2	$9,609,620,560	2%	-59%
2010 Q1	-$38,432,313,595	-14%	123%
2009	-$850,556,850	102%	101%
2009 Q4	$22,493,335,633	-38%	-65%
2009 Q3	$12,007,388,079	-12%	-69%
2009 Q2	$9,416,624,804	-60%	-71%
2009 Q1	-$44,767,905,366	159%	104%
2008	$56,171,073,844	-50%	-42%
2008 Q4	$36,133,211,157	-44%	-34%
2008 Q3	$13,716,647,195	-64%	-46%
2008 Q2	$23,574,779,971	-26%	-5%
2008 Q1	-$17,253,564,479	-21%	106%

Net Result in Debt Load – Green indicates that consumers decreased their debt relative to the previous quarter. Red indicates they increased their debt relative to the previous quarter.

Relative to Same Period – Green indicates that consumers either paid down more debt or accumulated less debt than they did in the previous two years. Red indicates that they either paid down less debt or accumulated more debt than they did in the same quarter in the previous two years.

Consumer Credit Card Debt and Charge-off Data (in Billions) Q1 1986 – Q4 2016:

*Numbers may differ from year to year due to the fact that the Federal Reserve regularly retroactively updating figures. Questions or requests for information can be directed to our media department.

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