Credit Card Debt Begins to Climb as Economy Slowly ... - Bankruptcy

By John Clark

After keeping the plastic in their wallets for the duration of the recession, American consumers have started to make up for lost time by using their credit cards more often, according to a report from the Orlando Sun Sentinel.

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Sources say American shoppers are on pace to add $47 billion in new credit card debt, according to data compiled by CardHub.com.

Credit Card Debt Begins to Rise as Economy Grows

If consumers do add the expected $47 billion in new credit card debt, that ?would bring the total amount of credit card debt incurred from the beginning of 2011 through the end of 2013 to nearly $130 billion,? according to CardHub?s website.

According to one official, the figures suggest that consumers ?are reverting back to the point where they are living off credit and spending beyond their means.?

This unfortunate trend, sources say, will work ?as long as the economy is doing fairly well,? but as soon as the economy takes another dip south, people who are only making minimum payments on their credit card accounts could feel a great deal of financial pain.

?Now that the economy is doing much better,? said financial expert Andrew Schrage, ?it seems that the average American consumer has become much less focused on paying down debt and is more willing to spend money on discretionary purchases.?

And if this trend continues, more consumers may seek credit card debt relief in Chapter 7 bankruptcy, which is designed to help reduce the burden posed by large amounts of unsecured debt.

Consumers Still Pay Off Billions in Credit Card Debt

Despite the expected $47 billion increase in credit card debt, consumers still paid down nearly $33 billion in debt during the first three months of 2013, according to sources.

But sources believe many of these consumers used holiday bonuses and tax refunds to make these payments, which means that the reduction was contingent on seasonal influxes of cash.

And this actually represented a 7 percent reduction from the amount of debt paid down during the first three months of 2012, according to reports.

This trend concerns many financial analysts, including Schrage, who said he knows ?plenty of people who use their tax refund as a safety net to subsidize their credit card debts.?

But these people ?know in the back of their minds that a big check is coming at the beginning of each year; therefore, they barely keep their heads above water while planning to pay off their balances at tax time,? said Schrage.

Source: http://www.clearbankruptcy.com/blog/credit-card-debt-begins-to-climb-as-economy-slowly-improves/

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