Is the next big problem in the United States economy credit card debt? With the ever increasing unemployment across the country, there may be more people unable to pay their credit card debt because they have no income. This could add to the financial woes of banks which are already struggling to stay afloat. But will credit card debt in the United States continue to rise?
A year ago, credit card holders had accumulated about $800 billion in debt. The total is now close to a staggering $1 trillion. That is a 25% increase in just one year. However, credit card debt has actually decreased slightly in recent months.
It’s unclear whether the amount of credit card debt will start to rise again. Some economists believe the overall credit card debt might continue to decrease as people are deciding to cut back on spending for fear they may soon be unemployed. Most people start carrying a balance after large expenses. With the decline in large ticket item sales, less people are ending up having credit card debt.
Another reason credit card debt may decrease is because the banks who own the credit card debt are offering to write off a higher percentage of people’s balances in an effort to entice the card holders to at least pay some of what they owe. Banks are trying to increase their cash flow in this way. Since none of the recent bailout or stimulus money is targeting credit card debt, this can be an attractive offer to the cardholders. If the banks write off part of the debt and the cardholders are paying off the rest, credit card debt will continue to decrease.
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