Credit cards are a way of life in America. We all know how they can help or hurt one’s personal finances but believe it or not, credit card debt can have an effect on the economy as a whole.
So far in 2019, the average credit card debt per U.S. household is $8,316. That's $1.061 trillion in total credit card debt divided by 128 million U.S. households. It's 3.3% more than in January, according to a Federal Reserve report. It exceeds the pre-recession record of $1.02 trillion reached in 2008.
Even though America’s economy is in better condition now, studies show that credit card debt took a dip after the recession but has risen again since then.] This indicates that consumers are reverting to pre-recession spending patterns.
However, consumer confidence declined for the fourth time in five months, suggesting that weak first-quarter growth and slower job gains in February are weighing on attitudes and potential spending.
A rise in credit card debt usually signals an improving economy. It shows that Americans think the economy is doing better, more people are working and earning a salary, and have more money to spend. However, this mindset also affects how they save.
It’s sometimes hard for consumers to see debt as a good thing because it means they have an obligation to pay someone out of future earnings. It can also mean costly interest charges. But credit card debt can actually be a positive thing from the standpoint of the entire economy.
According to a recent survey, 76% of adults in the United States report having at least one credit card, and nearly half of Americans carry credit card debt. When you consider how these tens of millions of credit card holders are able to make purchases just because they have a credit card, it’s easy to see how credit card debt can indicate healthy levels of economic activity. In fact, personal consumer spending accounts for more than two-thirds of the gross domestic product of the U.S. economy.
While it may seem to be the wisest course of action to make every effort to pay down your credit cards at the expense of other financial goals, experts advise that you focus on increasing emergency savings, taking advantage of the employer match in a 401(k) plan, and investing while paying down debt.
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