WASHINGTON—U.S. consumers racked up $34.4 billion in credit card debt during Q2 2016, the largest second-quarter accumulation since at least 1986, according to a new report that suggests the economy is heading for trouble.
“This development lends credence to the notion that we are flirting with financial disaster, coming on the heels of last year’s record increase in credit card debt ($71 billion) and last quarter’s record-low first-quarter paydown ($27.5 billion),” stated WalletHub in its 2016 Credit Card Debt Study. “Furthermore, we are now on track to surpass $1 trillion in outstanding balances for the first time by the end of 2016, with the average indebted household’s balance in turn rising to a perilous $8,500. Q2 2016 also appears strikingly similar to Q2 2007, which ended less than six months prior to the start of the Great Recession.”
The report can be found here.
The company stated that it is no longer 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.
“We accumulated $34.4 billion in credit card debt during Q2 2016 – most since at least 1986 and 79.60% above the post-Great Recession average,” WalletHub said, adding that charge-off rates remaining near historical lows continues to fuel lenders’ appetites for extending credit.
In Q2 2016 alone, U.S. consumers racked up nearly half (48%) of the total debt accumulated in 2015 and almost matched 2012’s $36-billion increase, WalletHub explained.
“Q2 2016 shares important similarities with Q2 2007, which was six months prior to the start of the Great Recession,” WalletHub said. “With 13 of the last 20 quarters reflecting year-over-year regression in consumer performance, we seem to be reverting to pre-downturn bad habits.”
The average indebted household’s balance rose to $7,817 in Q2 – just $611 below the tipping point WalletHub identified as being unsustainable.
“Unfortunately, the forecast for at least the rest of the year does not appear bright,” WalletHub said.
WalletHub projects that U.S. consumers will end 2016 with a net increase of roughly $80 billion in credit card debt.
For more info: www.wallethub.com