Americans owe over $1 trillion in credit card debt and recent polling data indicates they aren’t paying off those balances anytime soon.
According to a CNBC article, nearly half of all Americans carry a balance on their credit cards. Of those, only 30% say they will be able to pay off that balance within the next year.
About 27% say they will be able to pay off their balances in 1 to 2 years, 16% in 2-3 years, 8% say it will take 3-4 years, 5% estimate 4-5 years, and a full 7% say it will take more than 5 years to wipe out their credit card debt. Another 8% wasn’t even willing to make an estimate.
A credit card industry analyst told CNBC this is “a big issue.”
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It’s especially problematic given the increase in interest rates over the last couple of years. At average credit card APR currently sits at 17.65%. At that rate, interest can quickly push high balances even higher and put consumers in a position where they can no longer make payments. In fact, credit card delinquencies are on the rise. Flows into serious delinquency rose by 5% in Q4 2018, up from 4.8% in the third quarter, according to the most recent Federal Reserve data.
This is almost certainly one of the unspoken reasons for the “Powell Pause” in Fed interest rate hikes. The central bank has to know it can’t continue pushing rates higher in an economy were nearly 50% of consumers are already up to their eyeballs in high-interest credit card debt.
Some analysts look at credit card spending and spin it as good news for the economy. They argue that Americans are swiping those cards because they have good jobs and feel good about their economic prospects. But Peter Schiff tends to put a different spin on it. Americans are going deeper into debt because they can’t make ends meet. The CNBC report confirms what Peter has been saying.
“‘Buying groceries’ ranked as the top expense that added to people’s balances, according to the survey. About 28 percent of respondents say they depend on credit cards to pay for essentials such as rent and utilities.”
Emergency expenses also contribute to rising credit card balances. About 30% said medical bills contributed to their credit card debt and another 40% cited vehicle repairs. Other expenses Americans are putting on plastic include home repairs, job losses and childcare.
This is hardly a sign of a booming economy.
In fact, we have an entire economy built on working-class debt. The question is how long before this house of credit cards collapses?
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