American Credit Card Debt: How Bad Is It?

The good news is that the United States’ median household income has gone up 300% since 1980. The bad news? Credit card debt per household has gone up nearly 1200% since 1980. And that doesn’t even factor in home equity loans, auto loans, and other consumer debts, which have also increased in the last three decades. Very recently, though, the issuance of home equity loans has decreased dramatically, because home equity has decreased dramatically as a symptom of this especially tough and resilient recession. Therefore, more Americans are stuck with their high-interest credit card debts, no longer having the lower interest rate home equity-based alternatives.

Another symptom of this recession is, of course, the loss of income for millions of Americans, be it reduced hours at work, having to take a lower-paying job, or the loss of employment altogether. The sky-high debt coupled with reduced income has led to a dramatic increase in bankruptcies, as well as a record number of Americans walking away from upside-down home mortgages in favor of cheaper rental home or apartment payments.

In view of these developments, have credit card companies relaxed their ever-increasing push to sign up more debtors? Not really. An estimated six billion credit card offers were mailed out last year in the US.

Just as the housing devaluation has had a domino effect on the entire economy, many fear that America’s enormous credit card debt could unleash a plethora of other crises. Pension funds and other investors who buy this debt may end up losing a substantial amount of their investment money through increasing defaults.

Some are calling on Congress to reign in the rate increases, charges, and fees that credit card companies can levy on customers, while others claim that such measures would only serve to make Americans comfortable in their debt.

Lerin Roberts
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