Consumer fears about the economy prompted a drastic change in the way Americans spend and save following the Great Recession; in 2009, frugal consumers collectively slashed the total domestic credit card debt load by some $10 billion.
But, old habits die hard. According to a new study, U.S. consumers are reverting to pre-recession spending practices, and credit card debt is skyrocketing at an alarming rate.
Projected $54 Billion Increase In Credit Card Debt This Year
Every quarter, online credit card resource CardHub.com releases a credit card debt study. At the outset, it seemed consumers were making financial headway in 2011: the first quarter study reported a significant net decrease in credit card debt. However, any debt-reduction progress was wiped out by the $18.4 billion in credit card debt accumulated by Americans during the second quarter of 2011.
The second quarter credit card debt accrued in 2011 was 66 percent higher compared to the same quarter last year, and a stunning 368 percent increase compared to 2009. So what does the debt explosion mean?
"While a trend that points to consumers reverting back to pre-recession debt levels could be construed as a sign that things are returning to 'normal', I believe it is [a] worrisome indicator of a return to overleverage," Odysseas Papadimitriou, CEO of CardHub.com, told Daily Finance.
Options for Consumers
While it is true that a willingness to take on debt indicates growing confidence in the economy, experts warn against a return to pre-recession spending habits. Thanks to new laws that prevent credit card companies from unexpectedly changing the interest rate on an existing balance, credit cards are now a safer option for revolving debt. Even so, high interest rates make credit card debt particularly burdensome to whittle down.
If you are overwhelmed by credit card debt, you may wish to explore the protections offered in either Chapter 7 or Chapter 13 bankruptcy. Chapter 7 bankruptcy involves the liquidation of non exempt assets and an immediate discharge of debt; on the other hand, Chapter 13 helps consumers reorganize debts by setting up a court-approved plan that usually means a low monthly payment and a discharge of debts at the conclusion of the plan's term.
If you feel suffocated by debt, do not delay - contact a bankruptcy attorney today to learn more about how bankruptcy could get your financial life back on track.
