Over $900 Billion in credit card debt

With the global economy showing signs of extreme volatility and debate raging over both the timing and frequency 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 in credit markets.

Although 2015 started with promise, as consumers used tax refunds and annual salary bonuses to repay nearly $35 billion in credit card debt over the year’s first three months, we quickly erased our gains with the largest second-, third- and fourth-quarter binges since CardHub began conducting this study in 2009. In fact, we ended 2015 with a $71 billion net increase in credit card debt, largely because we incurred nearly as much new debt during the fourth quarter of the year as we did during all of 2014.

As a result, the average household with credit card debt now owes $7,879, and we are now perilously close to a tipping point at which balances become unsustainable and delinquency rates skyrocket, which could lead to a considerable constriction in credit availability. All of this has us wondering: Is 2016 the next 2008 for credit markets?

Credit card debt – debt Main Findings

2015 By the Numbers:

• Change in Outstanding Credit Card Debt: $45,481,300,200
• Credit Card Charge-Offs: $25,476,974,358
• Net Result in Debt Load: $70,958,274,558
  • Relative to 2014: 24%
  • Relative to 2013: 77%
  • Relative to 2012: 95%
  • Relative to 2011: 52%
  • Relative to 2010: 2822%
  • Relative to 2009: 8006%

Q4 2005 By the Numbers:

• Change in Outstanding Credit Card Debt: $45,733,679,600
• Credit Card Charge-Offs: $6,675,961,135
• Net Result in Debt Load: $52,409,640,735
  • Relative to Q4 2014: 14%
  • Relative to Q4 2013: 21%
  • Relative to Q4 2012: 30%
  • Relative to Q4 2011: 19%
  • Relative to Q4 2010: 104%
  • Relative to Q4 2009: 133%

• The $52.4 billion in new credit card debt that we added to our tab in Q4 2015 is the largest fourth-quarter buildup since the Great Recession – 283% higher than the post-recession average.
• We added more than twice as much credit card debt to our tab in the fourth quarter of 2015 than the third quarter, and the amount we incurred during this three-month binge almost equals our 2014 total. In fact, during this one quarter, we added more debt than in 2009, 2010 and 2011 put together.
• With 8 of the past 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.
• CardHub’s prediction that we would end the year with more than $900 billion in outstanding credit card debt was proven true during Q4, as we brought in New Year’s 2016 owing $917.7 billion to credit card companies.
• The average household with credit card debt now owes $7,879 – the highest amount since the Great Recession and roughly $500 below the tipping point CardHub identified as being unsustainable.
• While credit card debt levels are trending significantly upward, charge-off rates remain near historical lows and are, in fact, down on a year-over-year basis. Something clearly has to give, and it does not seem to be our spending habits.

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.

Net Result of Consumer Credit Card Debt Q1 2009 – Q4 2015

Net Result in Debt Load – Green indicates that consumers decreased their debt relative to the previous quarter. Red indicates they increased their debt relative to the previous quarter.

Relative to Same Period – Green indicates that consumers either paid down more debt or accumulated less debt than they did in the previous two years. Red indicates that they either paid down less debt or accumulated more debt than they did in the same quarter in the previous two years.

Consumer Credit Card Debt and Charge-off Data (in Billions):

Quarterly Credit Card Charge-Off in Dollars

Average Credit Card Debt per Household

2008 Q42009 Q12009 Q22009 Q32009 Q42010 Q12010 Q22010 Q32010 Q42011 Q12011 Q22011 Q32011 Q42012 Q12012 Q22012 Q32012 Q42013 Q12013 Q22013 Q32013 Q42014 Q12014 Q22014 Q32014 Q42015 Q12015 Q22015 Q32015 Q4$5,200$6,000$6,800$7,600$8,400$9,200$10,000Average Household Debt

Quarter	Average Household Debt
2008 Q4	$8,428
2009 Q1	$7,887
2009 Q2	$7,771
2009 Q3	$7,674
2009 Q4	$7,664
2010 Q1	$7,143
2010 Q2	$7,026
2010 Q3	$6,920
2010 Q4	$6,999
2011 Q1	$6,646
2011 Q2	$6,757
2011 Q3	$6,842
2011 Q4	$7,184
2012 Q1	$6,805
2012 Q2	$6,881
2012 Q3	$6,919
2012 Q4	$7,194
2013 Q1	$6,843
2013 Q2	$6,924
2013 Q3	$6,967
2013 Q4	$7,275
2014 Q1	$6,929
2014 Q2	$7,104
2014 Q3	$7,183
2014 Q4	$7,516
2015 Q1	$7,156
2015 Q2	$7,369
2015 Q3	$7,493
2015 Q4	$7,879

Tips for Managing Debt

1. Make a Budget (and Stick to It): It’s difficult to spend within reason or plan savings without knowing how your monthly spending compares to your take-home as well as what it is allotted to. That is why you should rank order your expenses – including debt payments, emergency fund contributions, and other savings – and trim the fat if necessary. And most importantly, once you develop your budget, make sure to stick to it or else you’ll have simply wasted your time.
2. Build an Emergency Fund: With a robust financial safety net, you’ll be less at the mercy of the economy and able to withstand a prolonged period of joblessness, should the need arise. Your goal should be to gradually save about a year’s worth of after-tax income through monthly contributions to an emergency account.
3. Improve Your Credit: This might sound a bit counterintuitive, considering that increased access to credit provides more opportunity to incur debt, but improving your credit standing will have a dramatic impact on the cost of your debt and, thus, how quickly you can pay it off. Better credit can also make it easier to find a job or a place to live – both of which impact your bottom line.You can determine your starting point and get personalized advice by signing up for our sister site WalletHub, which provides free credit scores, full credit reports and various other helpful tools.
4. Try the Island Approach: The Island Approach is a credit card strategy that involves using different cards for different types of transactions, as if they are a chain of distinct yet interrelated islands. For example, you could transfer your existing debt to a 0% credit card in order to reduce your monthly payments as well as get out of debt sooner and subsidize your ongoing spending with a rewards card or two that offer high earning rates in your biggest expense categories. This will enable you to get the best possible collection of terms as well as gain a better perspective on your spending and payment habits since finance charges on your everyday spending cards will signal a need to cut back.
5. Use the Snowball Method to Strategically Pay Off Amounts Owed: In order to become debt free at the least possible cost, you should attribute the majority of your monthly debt payment to the balance with the highest interest rate while making the minimum payment required on the rest. Once your most expensive debt is paid off, repeat the process as necessary with the remaining balances.
6. Evaluate Your Job Situation: In some cases, all the budgeting and planning in the world won’t be enough to solve your debt problems. You may therefore need to evaluate whether there are higher-paying opportunities out there for people with your background or if you’ll need to acquire some new skills in order to make yourself more marketable. This might require making a bit of an investment in yourself, but as long as you get a worthwhile return it’s money well spent.

Raw Data

* Some of the numbers may differ from study to study as a result of the Federal Reserve updating certain numbers for several months after first publishing them. For questions or more information regarding this study, please contact our media department.