News & Trends

Credit Card Debt Hits Record High Before the Holidays

Americans' credit card debt hit all-time high levels in the third quarter, eclipsing the prior peaks set before the Great Recession in 2008 and in the final quarter of 2016. Consumers racked up $757 billion in credit card debt in the third quarter, according to Experian data. The amount owed is an 11% increase from a year ago and the highest since the end of 2008. Balances on credit cards are up 8% for the year compared to 2016.

One potential contributing factor for increased credit card spending is that the unemployment rate has dropped 19% from the same time last year. The unemployment rate was 4.1% in November, with the U.S. adding 228,000 jobs, according to the Bureau of Labor Statistics. Americans have found a sense of job security and knowledge that finding a new job would be much easier now than in the past and that can lead to more spending as the chart below.

Credit Card Balances (in $Billions) to Unemployment Rate

Similarly, the volume of new credit cards has been rising in tandem with U.S. Consumer Confidence, which hit a 17-year high in November, according to the Conference Board.

Credit Card Volume (in $Billions) with Consumer Confidence

"The current direction of the economy has the approval from consumers and feeling upbeat from low unemployment, record stock market levels, and strong GDP growth," said Alan Ikemura, Experian Decision Analytics senior product manager. "That confidence is reflected by consumers spending more as new credit cards grew 4% this past year. As spending stays steady, delinquency rates for credit cards increased 16% versus last year, and this is something to monitor going forward."

How to Pay Off Credit Card Debt?

If you need to pay off credit card debt there are a few different strategies to consider. The first step to paying off your credit card debt is knowing how much you owe and make a list of those debts.

From there you can look into options such as these to see what sounds best for you to tackle credit card debt:

  • The Debt Snowball Approach: Make minimum payments on all your cards every month and apply your extra money toward the credit card with the lowest balance. When that card is paid off, you move to the one with the next lowest balance.
  • The Debt Avalanche Approach: Focus on paying off the credit card with the highest annual percentage rate (APR) first. Once you pay that card off, you can take that payment and put it towards the next-highest APR card while still paying the minimum on your other cards.
  • Credit Cards: You can apply for a balance transfer credit card because during the introductory period, you likely will not pay interest on the balance you transfer from another credit card.
  • Debt Consolidation Loan: If you do not have enough cash flow to pay your debts, a debt consolidation loan could help you pay off the credit card debt with an installment loan that has a fixed monthly payment amount.

If these approaches don't fit your needs, find a debt management plan that does and that you feel you can stick with. A good choice may depend on your overall debt amount, how much cash you have to pay that debt off, and your credit score and credit history.

Note: The data is from the Q3 2017 Experian-Oliver Wyman Market Intelligence report and the Experian Market Intelligence Brief that analyzes the trends impacting consumer credit decisions in the current economy.

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