Quarter 2 of America’s 2016 fiscal year saw a spike in the total
household debt of $35 billion, bringing it up to $12.29 trillion. How
do the average American families wind up adding such a large figure to
the national household debt? It is believed the spike was caused by two
financial categories: credit cards and auto loans.
When the economy was in its biggest, recent slump, people put away the
credit cards and only bought what they
knew they could afford. Since late 2014, that trend is turning around again;
credit card balances are now up $70 billion from what they were two years
ago. The hope of a rising economy seems to have generally stirred up people’s
willingness to lean on banks and creditors for part of their finances.
Despite the rise, all credit card balances across the country are $400
billion less than they were in 2008, when the economy was poised for trouble.
More Credit Card Debt is Good or Bad?
Determining if the rise in credit card debt and household debt shows positive
or negative trends is a delicate subject. Every bit of information seems
to suggest both ways at once.
On one side, people with subprime credit scores are getting them at an
increased rate since 2013, allowing them to make larger purchases and
attempt to finance them over time. On the other, if they are unable to
complete their payments, it would mean a larger number of people falling
into even more household debt. Relying entirely on credit cards to make
ends meet is an efficient way of piling on debt.
The good news is that delinquency rates show signs of serious improvement.
Debts that are 90 to 180 days delinquent or unpaid make up less than 1%
of total card balances. That number hasn’t been so low since 2003.
Debt balances that are so low they are considered derogatory and capable
of bank write-offs are also near a low at only 6.2%. The information indicates
that more people are getting ahold of credit cards, even when they have
bad credit score, but more people are also able to pay off their monthly
minimum pay requirements. Still, the threat of
bankruptcy hangs over many households.
It should also be noted that the $12.29 trillion national household debt
is not something to panic about, economists say. The $12+ trillion debt
does not mean that is how much money is missing from the American economy
but instead means that is how much money in the American economy is tied
up in loans and credit. If everyone suddenly defaulted and had no property
of real value, an occurrence that cannot happen overnight, then the $12.29
trillion household debt would become “real.”
There is a great deal of information about this subject. If you would like
to know more,
The M Report, and many others have online articles you can read. If you believe you
might need to file for bankruptcy due to overbearing credit card loans,
mortgages, or other financial troubles, you are not alone. Call
904.450.5313 to connect with Albaugh Law Firm and our Jacksonville bankruptcy attorneys.
We can help explain your rights and options during a
free case evaluation.