Credit Card Debt in America

Credit card debt climbs to all-time high

Credit card debt in the USA increased in June, exceeding its highest level shortly before the 2008 global economic meltdown. In June, the Federal Reserve reported on Monday that the number of unsecured credit lines, including credit card debt, increased to 1.02 trillion US dollars. Debt repayments failed to materialize during the recessionary period when several houses were excluded because their landlords received mortgages for which they would not have been eligible with stricter regulations.

However, credit card and car loan delinquencies are on the increase again. In the first three months, the New York Federal Reserve recorded a 7.5% increase in the proportion of credit card deposits that were heavily overdue or at least 90days past due. "Credit card debt just won't last forever without creating bigger problems," said Matt Schulz, CreditCards.com senior researcher.

In addition to the New York Fed, several credit card companies are announcing an increase in outages. One of the world' s leading card issuers, Synchrony Financial, said its credit loss reserves - which it uses to meet past due payment obligations - rose 30% year-on-year to $1.33 billion in the second half of the year.

American Express increased its provisioning by 26% compared with the previous year. Capital One said that its write-off ratio, or the proportion of assets it was not able to recover, had risen to 5.1% in the second Quarter from 4.07% a year before. "It is worrying that we are beginning to see that crime levels are now even rising with the jobless season at a cyclical low," said David Rosenberg, Gluskin Sheff's head of economics, in a Tuesday notation.

"Says me that we are seeing credit burdens spiralling that have little to do with a slowing down economic environment - proof that once again very high-risk credit has been expanded in this economic circle to include marginally, if not sketchily, borrowers." Mr Rosenberg said that credit expansion had gone far beyond work-related pay increases.

In addition, if banking tightens its credit policies, it could lower the share of expenditure in GDP creation. "Said Schulz, this recording should be used as a wake-up call for Americans to concentrate on their credit card debt.