Consumer Finance

U.S. Card Charge-Offs Down, New Debt Way Up

U.S. credit card holders are paying their bills at the best rate in three decades. According to the quarterly credit card debt study from CardHub, the credit card charge-off rate is now at 2.89 percent — the lowest point since 1985.

At the same time, while economic gains are making consumer spending habits sustainable — for now, at least — that spending is still racking up credit-card debt. U.S. consumers racked up $15.9 billion in net new credit-card debt in Q3 2014, and CardHub projects they’ll hit a total of more than $60 billion in new debt by the end of 2014, up at least 55 percent from the end of 2013.

That $15.9 billion represents the largest Q3 build-up in the past five years except for 2011, when consumers were running up debt at the (previously) highest rate since the start of the recession.

And while the charge-off rate is at a historic low, $6 billion of that $15.9 billion represents the charge-off rate for the quarter — debt that will never be repaid.

Meanwhile, the average household’s credit-card balance rose by 1 percent or $68 during Q3 to $6,870, a number that CardHub projects will hit $7,126 by the end of 2014. That’s just $1,200 short of a tipping point in CardHub’s model. Beyond that debt load, minimum payments will become unsustainable and delinquencies will skyrocket, CardHub CEO Odysseas Papadimitriou wrote.


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