Americans will hit $1 trillion of credit card debt by end of year…
American taxpayers are quick to criticize the federal government for its ever-increasing national debt, but a new study released Wednesday found taxpayers are also saddled with debt, and are likely to end 2016 with a record high $1 trillion in outstanding balances.
Cardhub, a site that recommends credit cards based on consumers’ needs, said that will be the highest amount of credit card debt on record, surpassing even the years during and before the Great Recession. The site said the record high was in 2008, when people owed $984.2 billion on their credit cards.
It’s good news for credit card companies that will profit off borrowers thanks to high interest rates, which average 15 percent. But the skyrocketing debt, along with other factors, indicates the U.S. economy may not be in as good shape as some believe.
“With the global economy in flux and debate raging over the timing of Federal Reserve rate hikes, data that speaks to the financial health of the average American household can be quite telling. Credit card debt statistics, in particular, reflect consumer sentiment and can foretell overleveraging bubbles that may trigger constriction across lending markets,” Cardhub CEO Odysseas Papadimitriou said in the report.
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Borrowers paid down approximately $26.8 billion in debt during the first three months of the year, the smallest first-quarter debt reduction since 2008. But borrowers also added $71 billion to their tabs last year, and the reduction so far this year covers just 38 percent of last year’s increase.