We may be in for some tougher economic times, according to new data from WalletHub. The consumer finance company reports that during third quarter of 2016 Americans accrued $21.9 billion in credit card debt. The average debt per household rose to $7,941, just $523 shy of what WalletHub considers an unsustainable tipping point.
We now owe almost exactly as much as we did the quarter before the Great Recession officially began. If charge-off rates begin to rise, things could get ugly fast.
WalletHub expects that 2016 will end with a net increase of $80 billion in credit card debt. Why are we so deep in the red? WalletHub doesn’t speculate, but does note that low lending rates might be part of the reason. I think it might also be thanks to the growing number of large school loans, another bubble that may be due to pop. There is $1.26 trillion in student loan debt in 2016, according to the Federal Reserve. Earlier this year, Mark Kantrowitz, an expert on student aid, said 2016 graduates were taking home an average debt of $37,172 (up 6% from last year). Student Loan Hero notes, graduates between the ages of 20-30 pay an average of $350 a month on those loans. This growing financial strain on a younger population may not be the sole reason for the growing reliance on credit, but it certainly can’t be helpful.