David Lerner Associates News

Credit Cards, Debt, and the Economy

Core Facts


Friday, May 3, 2019

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.

 

IMPORTANT DISCLOSURES

 

Material contained in this article is provided for information purposes only and is not intended to be used in connection with the evaluation of any investments offered by David Lerner Associates, Inc. This material does not constitute an offer or recommendation to buy or sell securities and should not be considered in connection with the purchase or sale of securities. 

To the extent that this material concerns tax matters, it is not intended or written to be used, and cannot be used, by a taxpayer for the purpose of avoiding penalties that may be imposed by law.

Each taxpayer should seek independent advice from a tax professional based on his or her individual circumstances.

These materials are provided for general information and educational purposes based upon publicly available information from sources believed to be reliable-- we cannot assure the accuracy or completeness of these materials. The information in these materials may change at any time and without notice.

David Lerner Associates does not provide tax or legal advice. The information presented here is not specific to any individual's personal circumstances. Member FINRA & SIPC

 

Number of views (200)

^ Top

About

Founded in 1976, David Lerner Associates is a privately-held broker/dealer with headquarters in Syosset, New York and branch offices in Westport, CT; Boca Raton, FL; Lawrenceville, NJ; and White Plains, NY. For more information contact David Lerner Associates Call 516-921-4200 Visit our website: www.davidlerner.com

^ Top

Contact

Jake Mendlinger
Account Manager
Zimmerman/Edelson
516.829.8374 X 232
jmendlinger@zimmed.com

^ Top

Print

x
  • Connect With Us