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Bryan P. Keenan

Rising credit card debt in the U.S. sparks concerns

Credit card debt is on the rise in the U.S., according to recent indicators. In the second quarter of this year credit card and other revolving credit rose to a whopping $685 billion -- an increase in $18 billion in just one quarter -- according to data compiled by the Federal Reserve.

Research by Deutsche Bank found a significant increase in credit card loans during the second quarter of this year for several large U.S. banks over the same period last year: 10 percent at Wells Fargo, 16 percent at U.S. Bank and 26 percent at SunTrust.

This may be good news for financial institutions and other credit card issuers, which charge an average of 12 to 14 percent interest on balances. Many work to entice customer credit card use with perks like cashback offers, airline miles and other travel incentives. Executives say that they are targeting consumers who are in good shape financially. Further, the delinquency rate is lower for credit cards than for other types of credit.

However, some economists are concerned that card issuers may be taking on more risk than is wise. One analyst recalls the housing bubble that preceded the financial crisis in 2007 and 2008, noting that the economic environment "can change very rapidly." As one credit card consultant put it, "Times are pretty good right now, but it's questionable how long it's going to last."

More concerning for those who deal with consumer bankruptcy and debt relief is the potential of all of this credit card debt for the credit card holders who are taking it on. An economic downturn can put people out of their jobs suddenly, with fewer resources to pay off accumulated debt. Election years and the transition to a new president also bring economic uncertainty both in the U.S. and around the world.

No matter how well you and your family may be doing and how tempting those credit card offers are, it's essential to be cautious about taking on unnecessary debt and to obtain experienced guidance to deal with it if you find yourself with more than you can handle.

Source: Financial Times, "US $18bn credit card debt spree sparks fears," Alistair Gray, July 31, 2016

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Bryan P. Keenan & Associates, P.C.

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