WASHINGTON—U.S. consumers racked up $21.9 billion in credit card debt during Q3 2016—the seventh-largest third-quarter accumulation in the last 30 years, according to WalletHub’s 2016 Credit Card Debt Study.
U.S. consumers are now on track to finish 2016 with an $80 billion net increase in credit card debt.
“All this represents serious cause for concern,” said WalletHub. “Not only was it the largest third-quarter debt increase since 2007 and the seventh-largest in the last 30 years, but the dismal Q3 2016 performance also comes on the heels of three equally foreboding financial feats, appearing to solidify an ominous trend.”
Consumers set the Q2 record last quarter, racking up $34.4 billion in new debt, right after recording the smallest Q1 pay-down ($27.5 billion) since 2008. And last year, consumers added the most credit card debt to their tab ($71 billion) since 2007.
“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,” stated WalletHub. “Unfortunately, the immediate forecast does not appear too bright.
If consumers do end 2016 with a net increase of roughly $80 billion in credit card debt, it would bring outstanding balances within striking distance of 2008’s all-time record and push the average amount owed by indebted households to a perilous $8,380, WalletHub said.
Other study points:
- Outstanding credit card debt is at the highest point since the end of 2008, and Q3 did nothing to divert consumers from a collision course with the $1-trillion mark.
- The $21.9 billion in credit card debt that was added in Q3 2016 is nearly 60% above the post-Great Recession average.
- Consumers owe almost exactly as much as they did the quarter before the Great Recession officially began.
- With 16 of the last 23 quarters reflecting year-over-year regression in consumer performance, it’s clear consumers have reverted to pre-downturn bad habits.
- The average indebted household’s balance rose to $7,941 in Q3 – just $523 below the tipping point WalletHub identified as being unsustainable.
“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. If charge-off rates begin to rise, things could get ugly fast,” concluded WalletHub.