According to recently-available data from TransUnion, one of the country’s principal credit-reporting agencies, American consumers are more leveraged today than at any point in the past year. The average household’s credit card debt increased by 6 percent over last year’s figure to nearly $5,000.
Worse, consumers appear to be falling further behind on their credit card payments. After years of decline following the recent financial crisis, the number of late credit card payments grew this year. Over .6 percent of these payments were more than 90 days late, which is defined as the threshold for serious delinquency.
Average credit card balances have now been rising for months. Banks and credit card companies have been abetting this worrisome trend by loosening their lending standards over the past year. According to TransUnion’s figures, the rate of new-card issues increased by 4 percent over last year’s already-elevated pace.
Over one-quarter of these new cards went to borrowers with poor credit scores, many of whom are already deep in debt. Rates on cards issued to so-called “sub-prime” borrowers tend to be far higher than the average rates on cards for individuals with good credit. Spending limits on these risky credit facilities also tend to be lower, increasing the likelihood that borrowers will exceed them and incur penalty fees.
Due to these and other factors, sub-prime lending is risky for creditors and borrowers alike. In fact, risky loans were the genesis of the financial crisis that nearly destroyed the global economy in the late 2000s.
According to TransUnion, financial necessity is driving lenders to court borrowers with poor credit. In the face of already-high debt loads and stagnating incomes, many prime borrowers are dialing back their borrowing. Over the past year, this demographic group applied for new credit cards and loans at a slower pace than their sub-prime counterparts.
What’s more, the available pool of prime borrowers appears to be shrinking.
The recent economic crisis forced millions of Americans to take on staggering amounts of debt just to cover their everyday expenses. For individuals who lost their jobs during the recession, these debt loads quickly became overwhelming.
Whether they were forced into declaring bankruptcy or merely missed some credit card payments before bringing their debts under control, these borrowers are still repairing the resultant damage to their credit scores.
The problem appears to be intractable. Job growth remains anemic with long-term unemployment rates rising to all-time highs since the financial crisis. Worse, Americans are dropping out of the workforce in record numbers. Many of the jobs that remain are low-wage service-sector positions that offer little in the way of security or advancement opportunities.
This bleak outlook underscores the importance of debt management. As job growth continues to lag population growth, most economists expect Americans to take on more debt than ever in the coming years.
According to TransUnion, the current average debt load is only 13 percent below the mid-crisis high of just under $6,000. Within a year or two, that record may fall. In fact, millions of people across the country already labor under debt loads many times higher than the average.
Fortunately, help is available for the millions of Americans struggling with swelling credit card balances, stubbornly-high interest rates and aggressive creditors. Debt Consolidation USA, a cutting-edge matching service that puts consumers in touch with the country’s top debt settlement firms, has helped thousands of grateful clients find meaningful debt relief.
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