Study: Consumers Pay Down Credit Card Debt in First Quarter; But Not Enough

6/14/2017 3:41 PM

Credit card debt is still on track to reach $1 trillion, potentially by the end of this year.


While consumers paid down their total credit card debt by $31.5 billion in the first quarter this year,  WalletHub’s 2017 Credit Card Debt Study: Trends & Insights reported that the payments are not enough to reflect an improvement over the post-Great Recession average.

“Credit card debt statistics speak to the financial health of American households. And they can foretell overleveraging bubbles that may trigger constriction across lending markets,” WalletHub senior researcher Alina Comoreanu wrote in the report. “From that perspective, the $89.4 billion in new credit card debt that we added to our tab in 2016 represents serious cause for concern. And the fact that we repaid $31.5 billion of our debt during the first quarter of 2017 actually provides little reason for comfort.”

Consumers often take a chunk out of their credit card debt in the first quarter of the year because of annual salary bonuses and New Year’s resolutions to get ahead on their finances, according to WalletHub.

The total 2017 first quarter debt payment was 14 percent higher than results in first quarter 2016, but 9 percent less than paydowns in the first quarter 2015.

Credit card debt reached $940.2 billion in the first quarter, a 6 percent increase from $885.4 billion in the first quarter 2016.

The average credit card debt per household in the first quarter this year increased 6 percent to $8,038, compared to $7,597 in first quarter 2016

Overall, WalletHub reports outstanding credit card debt is still on track to reach potentially reach $1 trillion this year.

There was $89.4 billion in new credit card debt at the end of 2016, the highest amount since 2007 and 145 percent above the post-recession average.

“WalletHub projects that we will end 2017 with more than $60 billion in new credit card debt. That would mean we’d owe well over $1 trillion in credit card debt overall,” according to Comoreanu.

“The months to come will be especially telling, as this mediocre first-quarter performance comes on the heels of a number of low-water marks set in 2016,” Comoreanu wrote in the report. “We started the year with the smallest Q1 paydown ($27.6 billion) since 2008. And we finished it by setting post-2007 records for the most debt added in a second, third and fourth quarter, respectively. 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.”

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