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Credit card debt hits new record, raising warning sign

Paul Davidson, USA TODAY Published 6:01 p.m. ET Jan. 8, 2018
© 2018 USA TODAY, a division of Gannett Satellite Information Network, LLC
Source; excerpts follow:


Americans' outstanding credit-card debt hit a record in November, highlighting a more confident U.S. consumer but also flashing a warning signal of potential trouble down the road.

Revolving credit, mostly credit cards, increased by $11.2 billion to $1.023 trillion, the Federal Reserve said Monday. That nudged the figure past the $1.021 trillion high-water mark reached in April 2008, just before the housing and credit bubbles burst. Over the past year, revolving credit has surged by $55.1 billion, or 5.7%, according to the Fed and Contingent Macro Research…

The all-time-high for credit-card debt doesn't pose the risks to the economy that existed in 2008 because incomes are higher, UBS Credit Strategist Stephen Caprio says. The ratio of credit-card debt to U.S. gross domestic product is about 5%, compared with 6.5% in 2008, he says….

"People should make 2018 the year they focus on knocking down their credit-card debt," says Matt Schulz, senior industry analyst for CreditCards.com. With the Federal Reserve continuing to raise interest rates, "that credit-card debt is going to grow faster and faster," siphoning off money Americans should be putting aside for retirement," Schulz says.

Read full article.

Although not a crisis from a "global economic meltdown" perspective, individual consumers (like you and I) would be well-served to reduce such borrowing, and especially to reduce and eliminate such high-interest debt. Credit card debt is a major pitfall, and hurdle to personal financial comfort and success.

If you have to rely on credit cards for routine purchases (like groceries, utility bills, etc.), then you need to develop a personal budget and stick to it. Learn to live within your means; help and education is widely available for this. And if you're using such credit to finance some kind of "dream lifestyle" or compulsive buying, then I strongly suggest that you talk it out with a confidante or trusted advisor because this is self-destructive behavior, and you really need to stop it right now. Millions of folks have over-extended themselves like this so don't be embarrassed… but admit to the problem and ask for help (I did).

Ideally, credit cards would be used for mere purchasing convenience, in which case you would pay off your outstanding balance every month and thereby avoid any ridiculous interest charges. Or used as short-term loans for genuine emergencies (like the transmission falls out of your car or your health care insurance temporarily lapses), and you pay off your balance within weeks, or a couple of months at best. It's when you "kick the [financial] can down the road" and normalize/rationalize such behavior that you can get into very big trouble.

Credit card companies play upon our inherent desires and insecurities, and make billions of dollars per year at our expense. Don't be a victim; make it a lifetime goal to live within your means. It's easy to say: "Increase income and/or decrease expenses" but the reality is it takes effort, and usually difficult lifestyle changes to make it work.

It's worth the effort.

3 Comments On This Entry

I rely on credit cards for routine purchases (grocery, general merchandise, etc) for one specific reason: Security. I don't like carrying a lot of cash, nor the risk of potentially exposing my debit card to getting hacked.

Motley Fool: Why You Should Never Use Your Debit Card
It’s not our fault. We havent paid interst on a credit card account in 20 years and we purchase almost everything with them.
I agree with both of you. I only use my bank card (essentially a debit card) to buy gas at those stations that don’t balk at my answering NO when asked: “Is this a debit card?” If they ask for my password, I cancel and use a credit card instead. And unlike so many others, I’m fortunate in that I can pay off my credit card balances EVERY month. High-interest credit card debt is the worst, which is why I urge folks to do whatever they can to avoid carrying a balance. Except for genuine emergencies, if you can’t afford to pay cash then you can’t afford the purchase.

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