Credit card debt rose amongst American consumers for the first time since 2008, according to a new report issued by the Federal Reserve this Monday.
The government agency’s report revealed that credit card debt, or revolving debt, stood at $800.5 billion as of the end of 2010—a $2.3 billion increase from the previous month. The increase represents the first time that credit card debt has risen since 2008 when the economic recession began and credit card debt had been recorded to be at its lowest levels since 2002.
At the time, credit rating agency Director of Consulting and Strategy Ezra Becker said that the decline meant that more and more Americans were trying to repair their credit because of the uncertainty of the job and housing markets.
Consumer revolving debt stood at $957.5 billion as of the end of 2008, the report showed.
All told, consumer credit increased at an annual rate of 2.5% in the fourth quarter of 2010, while revolving credit declined at an annual rate of 2.75% and non-revolving debt (such as car loans and student debt) increased at an annual rate of 5.5%. For the month of December, consumer credit rose on a whole by 3% at an annual rate, according to the report.
Here’s a break down of how consumer debt has progressed over a five year period:
|Type of Debt||October||November||December|
Credit Card Debt: Good or Bad
The question of whether this rise in consumer credit card debt is good or bad is debatable. While most would agree that less consumer debt is the ideal, credit card or otherwise, the rise in credit card debt could mean consumer confidence is on the rise and that more Americans are willing to take on additional debt to meet their needs.
Dave Jones, President of Association of Independent Consumer Credit Counseling Agencies (AICCCA), says that though the increase in consumer credit card debt could mean Americans are more confident consumers, it could also signal that consumers are having a difficult time letting go of their credit card dependence.
“Overall, we are glad to see some level of improvement in consumer confidence but we still have a lot to do to rebuild the underlying financial stability of most American families,” Jones told MyBankTracker.com. “I guess you could say that overall, we are ‘guardedly optimistic.'”
Andrea Travillian of Smart Step Inc., a nonprofit organization that provides financial services for women, feels the rise in consumer credit card debt could be a sign of bad things to come.
“Debt was one of the driving factors in the collapse of the market,” Travillian told MyBankTracker.com. “Adding more credit card debt for most is leading us right back to a greater level of insecurity.”
How has the recession affected your credit card spending? Let us know in our comments section.