The American economy is slowly recovering as American consumers are starting to shop again. However, a large part of this extra spending is coming from higher credit card debt rather than a stronger economy.
According to a recent study, Americans are on track to take on an extra $47 billion in credit card debt this year. If that happens, total credit card debt will have increased by nearly $130 billion from 2011 to the end of 2013.
The research predicts this increase despite the fact Americans paid off more than $30 billion worth of credit card debt in the first quarter of 2013. Consumers typically pay down debt at the beginning of the year, as this is the time when they receive annual bonuses and tax refunds.
The study noted consumers paid down 7 percent less debt this year than at the start of 2012.
Higher credit card debt could be the result of a couple factors. It’s also possible Americans have a rosier outlook and are more comfortable taking on debt in anticipation of earning more in the future.
Either way, this is a bit of a troubling trend, as many Americans underestimate just how difficult it is to get out of debt.
Card minimum payments are so low that they can make a large amount of debt seem manageable, but this disguises how long it actually takes to get debt-free.
Consumers should make every effort to avoid debt and build up a cash emergency fund so they don’t have to turn to their cards during a period of unemployment.
Source: northfulton.com. Photo source: checkcity.com.
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