Americans Accumulate More Credit Card Debt - Again

Woman with credit cardsNothing conflicts a personal finance writer like the news that Americans are spending again. On one hand, consumer spending makes up a whopping 70% of our domestic economy, so loosening the purse strings is a good sign from a national economic perspective. From a household budget standpoint, though, a growth in spending can be less benign, especially if that spending takes the form of an increase in credit card debt, which is what the Federal Reserve's most recent numbers show.

According to the Fed's new G19 report, which was released Monday, America's revolving debt (a.k.a. credit card balances) rose 3.5% on an annualized basis in December. By the Fed's numbers, this marks the first increase since 2009, when the amount of revolving debt dropped by 12.4% on an annualized basis in the fourth quarter. Consumers still had an overall decrease in revolving debt in 2010, but it was a smaller decrease than we saw in 2009.Some experts say at least some of the decrease in our collective credit card debt is deceptive in that it can't all be credited to people buckling down and paying off their cards. As this chart and accompanying article from the website point out, the amount that banks are charging off is substantial, often $20 billion or more each quarter. (We've discussed this phenomenon, too.) As a result, while the official stats might show a small increase in credit card debt, we're actually accruing much more -- it's just being "canceled out" in the data-gathering process by big charge offs.

And while the total amount of credit card debt we carry as a nation is still dropping -- from $957.5 billion in 2008 to $865.8 billion in 2009, then down to $800.5 billion last year -- it's a troubling sign to see our debt load increasing again while the economy is still shaky.

Either way you look at it, that $800.5 billion isn't going away any time soon. And while it's true that we need spending to boost the economy, so people start buying more stuff and creating demand for more goods and services that will eventually lead to jobs, that spending is a double-edged sword if it's money we don't have as individual consumers.
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