$1 Trillion In American Credit Card Debt By Year End

The early results are in, and U.S. consumers have done even worse than expected through the first three months of 2016. According to CardHub’s Q1 2016 Credit Card Debt Study, released today, we repaid just $26.8 billion in credit card debt during the first quarter of 2016 – the smallest first-quarter pay down since 2008.

As a result, CardHub now projects that we will end 2016 with $1 trillion in outstanding balances – a threshold never before reached, not even during the period preceding the Great Recession.

With the global economy in flux and debate raging over the timing of Federal Reserve rate hikes, data that speaks to the financial health of the average American household can be quite telling. Credit card debt statistics, in particular, reflect consumer sentiment and can foretell overleveraging bubbles that may trigger constriction across lending markets.

It is with that context that some might view the fact that U.S. households paid down roughly $26.8 billion in credit card debt during the first quarter of 2016 as decidedly good news. But it’s not. Not only does this paydown come on the heels of a year in which we added an astounding $71 billion to our tab, but it’s also the smallest first-quarter debt reduction since 2008.

As a result, CardHub is projecting that we’ll end 2016 with roughly $1 trillion in outstanding balances for the first time ever, which would bring the amount owed by the average indebted household to more than $8,500. You therefore have to wonder how long we can keep this up.

American Credit Card Debt – Main Findings

Q1 2016 By The Numbers:

  • Change in Outstanding Credit Card Debt: -$33,753,620,600
  • Credit Card Charge-Offs: $6,994,395,551
  • Net Result in Debt Load: -$26,759,225,049.34
    • Relative to Q1 2015: -23%
    • Relative to Q1 2014: -17%
    • Relative to Q1 2013: -18%
    • Relative to Q1 2012: -22%
    • Relative to Q1 2011: -18%
    • Relative to Q1 2010: -30%
    • Relative to Q1 2009: -160%
  • We paid off $26.8 billion in credit card debt during the first three months of 2016, which isn’t as good as you might think, considering that it’s the smallest first-quarter paydown since 2008 and nearly 25% below the post-recession average.
  • This first-quarter pay down covers just 38% of the $71 billion we added to our tab in 2015.
  • With 8 of the last 10 quarters reflecting year-over-year regression in consumer performance, evidence is mounting to support the notion that credit card users are reverting to pre-downturn bad habits.
  • Although the average indebted household’s balance dipped to $7,597 during the first quarter, this still represents a 6% increase relative to Q1 2015. It’s also just $831 below the tipping point CardHub identified as being unsustainable.
  • Despite credit card debt levels trending significantly upward, charge-off rates remain near historical lows. Something clearly has to give, and it does not seem to be our spending habits.
  • The first quarter of 2016 shares a lot of similarities with Q1 2007, including the pay-down amount, its size in relation to the previous quarter’s build-up and the charge-off rate at the time. That is not good news for consumers, considering the financial turmoil that followed the last time around.

American Credit Card Debt – Data & Graphs

Please note that figures listed in the Main Findings section of a particular quarter won’t always match those in the Data & Graphs section of this report, as the Federal Reserve regularly updates historical data with new research. Figures included in each Main Findings section reflect the information that was available at the time of that quarterly study being conducted, while the Data & Graphs section reflects the most recent data available.

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