Consumer credit card debt raising concerns

The United States is experiencing a booming economy and record low unemployment levels, and despite that, Americans are struggling with rising credit card debt.

The credit card industry is floored by reports of credit card debt rising to levels not seen in seven years.

The charge off rate – the percentage of borrowed money that credit card companies have given up on collecting – increased to 3.8 percent on just the first 3 months of 2019, according to a Bloomberg intelligence report.

This latest report is followed by warnings in January that highlighted the “historic lows” of charge-offs were on their way to coming to an end.

Some credit card companies have begun to change their policies that reflect the changing charge off rates. Discover has begun to shut down inactive accounts and limit the size credit-line for existing and new customers.

Capital One, one of U.S. largest credit card companies, stated that their national charge-off rate increased from 4.6 percent to 5.02 at the end of last year. Capital One CEO Richard Fairbanks said that there is a “degradation” with credit quality among some customers. Fairbanks said the increase could be due to negative credit events during the last financial crisis disappearing from some customers’ credit history. According to a Bankrate survey, 3-out-of-10 Americans have more credit card debt than money in their savings account. The survey also found that out of 1004 adults, only 44 percent had more money saved in their savings account than credit card debt. Last year, 58 percent had more money saved in their accounts than debt. In a creditcard.com survey, results found out that 56 % of Americans have had credit card debt for at least a year. 37 % of adults surveyed held credit for at least 2 years, 23 % for at least 3 years and 14 % for more than 5 years.

Most of those surveyed expressed their lack of concern about the amount of debt and simply registered credit card debt as a part of life.

For years, competition for customers has remained strong between credit card companies, but due to these reports there has been a spike in marketing for the same group of clients.

Bloomberg reports that although debt and charge off rates are raising they continue to remain close to historic lows.

Written by Bruno Ugaz - Media Director for ADVUE Consulting