Over the past several months the total amount of consumer debt has increased. And while some may take this as a good indicator of our nation’s rebounding economy, many also worry that people are setting themselves up for financial catastrophe by pilling on more credit card debt, and other debts, than they really can afford.
According to the Federal Reserve, Americans total amount of consumer debt for December 2011 reached $2.498 trillion. This represented a 9.3 percent increase for revolving and non-revolving debt.
Even just for the last portion of the year, consumer debt also seemed to increase at an almost rapid increase, with credit increasing at 7.5 percent for the fourth quarter. Additionally, December alone saw a 9 percent increase in non-revolving credit, and a 4.5 percent increase in revolving credit.
However, the problem is that the economy is still hurting, and the unemployment rate is still rather high. This means that people may be setting themselves up for a financial disaster by once again using their credit cards more frequently and taking out more in loans than they realistically can afford, especially if they end up losing their job.
Instead of spending, one certified public accountant said, people need to be saving and paying off the debts they already have. However, going by the consumer debt trends, this does not necessarily seem to be what people are doing. In turn, this could end up leading to more people with crushing debts turning to bankruptcy as a way to wipe their financial slate clean.
Source: New York Post, “Credit Card Debt Nears Toxic Levels,” Feb. 26, 2012