Americans whipped out the plastic in May, driving credit card debt up 11.2%, according to the Federal Reserve's G-19 Consumer Credit report. Loans for education, automobiles and other "non-revolving" credit rose a more reasonable 6.5%. What was behind the surprising upswing in credit card use?
It could have been in response to an increase in offers sent out in the mail from banks, according to Roy Persson, director of competitive tracking services at Ipsos. For example, Discover offered a 24-month interest-free balance transfer period. (Source: Fox Business News, Consumers Credit Card Balances Shoot Up in May, July 22, 2012)
Until May's report, people were cutting back on personal consumption expenditures. "Revolving" credit card debt rose to $870.2 billion. Despite May's increase, this is still down significantly from the record $1 trillion owed in 2008 to credit card companies. (Source: Federal Reserve, G.19 Release, July 9, 2012)
May's report showed that Americans are still taking advantage of record-low interest rates to refinance homes, take out school loans and buy cars. A record $1.7 trillion in "non-revolving" debt was owed, or $14,300 per household.
As a result of May's 8% rise in total household debt, Americans now owe $2.57 trillion, the largest amount since August 2008. This translates to a whopping $21,600 per household. .(Note: This estimate is based on 119 million households or 308.7 million / 2.59 persons per household. Source: U.S. Census, 2010 Data; Average Household Size)
What It Means to You
Take advantage of today's record-low interest rates to invest in your future. One of the trends emerging from the recession is a focus on employees who demonstrate a clear competitive advantage. Companies, like everyone else, are looking for value on every wage dollar they spend. To determine your competitive advantage, get clear on what you have to offer, who would most benefit from your skills and abilities, and who your competition is. For more, see Competitive Advantage.
How to Reduce Credit Card Debt
- A Life Preserver in a Sea of Debt
- Making a Plan to Reduce Credit Card Debt from the About.com Guide to Credit, LaToya Irby
- More Resources for Reducing Credit Card Debt from the About.com Guide to Beginners Investing, Joshua Kennon