3/13/2017 5:29:00 PM

Study: Household Credit Card Debt Continues to Approach Post-Recession Records

The fourth quarter of 2016 marked record increases in debt since 2007 and the highest amount of average debt per household for the year, according to WalletHub.


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Consumers added $60.4 billion in credit card debt in fourth quarter 2016, the highest increase in one quarter since 2007, according to the latest Credit Card Debt Study: Trends & Insights from WalletHub.

“This is the largest fourth-quarter debt increase since 2007 as well as the third-largest in the last 30 years,” according to the Wallet Hub report by Alina Comoreanu. “And it resulted in an $89.2 billion net increase in credit card debt for 2016 as a whole, which is the most for a year since 2007.”

Consumers accumulated $21.9 billion in credit card debt during the third quarter 2016, also marking a record credit card debt increase since 2007, according to Wallet Hub.

“We set the post-2007 Q3 record last quarter, racking up $21.9 billion in new debt, right after adding a Q2-record $34.4 billion to our tab and recording the smallest Q1 pay-down ($27.5 billion) since 2008,” according to Comoreanu. “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. And WalletHub projects that in 2017 we will surpass the current record for outstanding balances by at least $100 billion.”

The report also shows that the fourth-quarter increase is nearly 54 percent higher than the post-Great Recession average in credit card debt.

Consumers’ total outstanding credit card debt, including the fourth quarter increase, is $978.9 billion. The total outstanding credit card debt in the first quarter last year was $884.6 billion, according to the report. It reached $981.8 billion in fourth quarter 2007.

The net change in credit card debt was $71 billion in 2015 and $59.4 billion in 2014.

Comoreanu notes in the report that 17 of the last 24 quarters show “year-over-year regression in consumer performance.”

The average credit card debt per household in the fourth quarter was $8,377, compared to $7,893 in fourth quarter 2015, according to the report. It declined slightly to $7,590 in the first quarter 2016 before increasing to $7,817 and $7,941 in the second and third quarter 2016, respectively.

The charge-off rate was 3.5 percent in the fourth quarter 2016. The rate fluctuated from 3.2 percent in the first quarter, to 3.1 percent in the second quarter to 2.9 percent in the third quarter before increasing in the fourth quarter, according to the report. The charge-off rate was 4.18 percent in fourth quarter 2007.

“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,” according to Comoreanu.

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