BIRMINGHAM, Ala.—One analysis is suggesting that even as U.S. consumer credit card debt has hit an all-time high, it is not yet cause for concern.
According to the Federal Reserve's latest consumer credit report, in November 2017, revolving debt increased by $11.2 billion to a total of $1.023 trillion—higher than the pre-recession high of $1.021 trillion.
“At first glance, this sounds like a bad situation for America. We've exceeded the debt levels that created the Great Recession. Should we be worried?” asked Bill Hardekopf, CEO of LowCards.com.
The short answer is no, or at least, not yet, he said.
“As UBS Credit Strategist Stephen Caprio pointed out, the ratio of credit card debt to gross domestic product is lower now than it was in 2008: 5% vs. 6.5%. Our economy is healthier now than it was 10 years ago, so increasing credit card debt is not as pressing a concern,” said Hardekopf.
Caprio also noted credit card delinquencies are currently at 7.5%, much lower than the 15% delinquency rate of the recession.
“It's even lower than the historical average of 9%. Despite having high credit card balances, Americans have proven they can manage their money and pay their debts on time,” Hardekopf said.
But Hardekopf noted concern for the future if consumer card debt keeps tracking in the same direction as today. He said consumers need to assess their personal debts, especially with rates rising.
“Last month, the Federal Reserve raised benchmark interest rates, which will lengthen the time it takes to pay off balances and increase the amount of interest paid,” Hardekopf noted.