Consumers On Track To Rack Up $55B In Card Debt

While consumers have been chipping away at their credit card debt — paying down $34.7 billion owed in Q1  — it seems those consumers have only hit the tip of the debt iceberg.

A new report released by CardHub shows that debt reduction was up 7 percent in the first quarter when compared with the two years prior, but that doesn’t mean that consumers aren’t plagued with a pile of hefty credit card debt. Last year consumers paid off more than $57 billion in new debt, with an average household carrying a balance of $7,177. Adding all that up, CardHub’s projections peg U.S. consumers to round out 2015 with a credit card debt of roughly $55.8 billion.

“The global economy has been in something of a holding pattern, as the suppressed cost of oil and the strength of the Dollar have provided a windfall for some households while making the earnings expectations of many companies unattainable,” CardHub CEO Odysseas Papadimitriou wrote in the report.

“And while recent reports foretell the continued growth of the U.S. economy, analysis of the newest data on consumer spending and payment habits could serve to either substantiate our enthusiasm or dampen it with the clouds of caution,” he added.

So the good news from this report? The year’s debt reduction is growing. And the bad news?

“We simply started with more debt to repay…starting 2015 with the largest first-quarter average household credit card balance in six years,” Papadimitriou wrote.

Debt paydown has dipped down to 2012 levels, the report found, but starting off the year with so much debt suggests that U.S. consumers are nearly inching back to where they were last year in terms of paying off debt. Another key metric highlighted showed that credit card defaults declined by more than $350 million in 2015’s Q1. That’s the lowest default rate since 1995, the CEO noted.

“Despite our first quarter improvements, U.S. credit card habits show signs of regression to pre-recession levels. The second quarter of 2015 will therefore offer a lot of context to our current trajectory, enabling us to better authenticate trends that appear to be emerging,” Papadimitriou wrote.

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On Tuesday, March 31, 2020 at 9:00 AM (ET) join PYMNTS CEO Karen Webster and panelists Vincent Kilcoyne and Roland Brandli of SmartStream for an in-depth discussion on the need to use transformative digital strategies to remain relevant in today’s challenging financial landscape. The discussion will cover strategies that will allow clients to improve operational control, reduce costs, build new revenue streams, mitigate risk and comply accurately with regulation.