A second warning about consumer credit card debt indicates Americans have returned to spending more with borrowed funds. Released June 8, the WalletHub analysis is a snapshot of 2016 consumer spending data. This blog covered the specter of increased consumer credit debt combined with higher delinquency rates in the article “Consumer Spending and Debt Increases Demand for Debt Collections” on July 28.
The WalletHub study looked at several financial parameters between Q1 1986 and Q1 2017. Categories included Outstanding Credit Card Debt, Quarterly Net Change in Consumer Credit Card Debt, Annual Net Change in Consumer Credit Card Debt, Quarterly Credit Card Charge-Off Rate, and Average Credit Card Debt Per Household. 
These focus areas are accompanied by interactive data tables and raw data covering the 31-year period.
“The $89.4 billion in new credit card debt that we added to our tab in 2016 represents serious cause for concern,” states the study’s introductory paragraph. “We started the year with the smallest Q1 paydown ($27.6 billion) since 2008, and we finished it by setting post-2007 records for the most debt added in a second, third and fourth quarter, respectively.” WalletHub projects that consumers will end the year with more than $60 billion in new credit card debt.
Main Findings of the Credit Card Debt Study
- Outstanding credit card debt is at the second-highest point since the end of 2008 and remains on a collision course with the $1 trillion mark.
The $31.5 billion in credit card debt that we repaid in Q1 2017 is 5% below than the post-Great Recession average.- We ended 2016 with $89.4 billion in new credit card debt, most for a year since 2007 and 145% above the post-recession average.
- This first-quarter pay down covers just 35% of the $89.4 billion that we added to our tab in 2016.
- With 13 of the last 21 quarters reflecting year-over-year regression in consumer performance, it’s clear that we’ve reverted to pre-downturn bad habits.
- The fact that charge-off rates remain near historical lows continues to fuel lenders’ appetites for extending credit, but there will be a tipping point eventually.
Tips for Managing Debt
The study concludes with a handful of consumer suggestions:
- Make a Budget & Stick to It
- Build an Emergency Fund
- Improve Your Credit
- Try the Island Approach — “The Island Approach is a strategy that involves using a collection of credit cards, with each serving a specific purpose.”
- Repay Your Most Expensive Debt First
- Evaluate Your Job Situation — “All the budgeting and planning in the world won’t be enough to solve your debt problems.”
In Closing
Point number six under “Main Findings” is cause for alarm, especially in the vulnerable lending areas of credit card balances, student loans and auto loans.
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