{"id":354699,"date":"2022-02-10T09:49:00","date_gmt":"2022-02-10T16:49:00","guid":{"rendered":"https:\/\/www.creditrepair.com\/blog\/?p=354699"},"modified":"2022-08-04T11:58:30","modified_gmt":"2022-08-04T17:58:30","slug":"could-credit-card-debt-be-setting-us-up-for-another-recession","status":"publish","type":"post","link":"https:\/\/www.creditrepair.com\/blog\/uncategorized\/could-credit-card-debt-be-setting-us-up-for-another-recession\/","title":{"rendered":"Is Credit Card Debt Setting Us Up for Another Recession"},"content":{"rendered":"

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2015\u2019s Credit Card Debt Trends<\/em><\/strong><\/p>\n

Earlier this month CardHub released its 2015 Credit Card Debt Study<\/a>, which compiled data on American credit card habits last year, and the findings could be troubling for America\u2019s financial future. Many analysts \u2013 including Odysseas Papadimitriou, CardHub\u2019s CEO \u2013 believe that current borrowing trends could be setting the United States up for a potential recession.<\/p>\n

I recently wrote a post on the Federal Reserve\u2019s report on credit card borrowing habits. The Federal Reserve found that, no matter the economy, Americans still put large amounts of debt on their credit cards.<\/p>\n

CardHub\u2019s report confirms the Federal Reserve\u2019s findings, but goes even further. In fact, CardHub found that Americans are now borrowing at a rate unheard of since the 2008 recession. So what does the data tell us?<\/p>\n

In 2015, Americans added $70.9 billion<\/strong> to their total credit card debt \u2013 over $52 million<\/strong> of which came in the fourth quarter. To put this in perspective, that\u2019s almost as much credit card debt as Americans amassed in the entirety of 2014. It\u2019s difficult to fathom numbers this large \u2013 so when CardHub drilled down to an individual level, they found that the average American household now owes $7,879 <\/strong>in credit card debt.<\/p>\n

While these findings tell us that Americans are now borrowing at an increased rate, why should we be concerned? A number of reasons, says Papadimitriou.<\/p>\n

Consumers are going back to 2008 spending habits, but incomes have not grown much in the past decade \u2013 this suggests we\u2019re borrowing at an unsustainable rate that we cannot keep up with in the long term. If Americans continue to rack up credit card debt beyond their means to pay, there could come a tipping point at which a large segment of the population can no longer afford their payments \u2013 which could be disastrous for the economy.<\/p>\n

If this reminds you of the conditions surrounding the 2008 recession, it should \u2013 there\u2019s a parallel between the way Americans are treating credit cards and the way the housing bubble grew before imploding.<\/p>\n

With the housing market, Americans were taking out mortgages that they could not afford, and eventually the bubble burst and sent many homeowners into foreclosures and bankruptcy. With the credit card market, the same conditions apply. If too many Americans get to a point at which they can no longer make their credit card payments, it could spell disaster for the credit industry, which in turn would send shockwaves across the entire economy.<\/p>\n

The Importance of Spending Responsibly<\/em><\/strong><\/p>\n

Credit cards are a useful tool and there\u2019s nothing to fear by using them. They can help you build credit and establish good financial habits. The key is to use them responsibly. <\/em>Responsible credit card holders follow a few important practices:<\/p>\n