Some Wisconsin families may not be surprised to learn that the Federal Reserve Bank of New York issued a year-end report showing that Americans’ credit card debt rose nearly $2 billion in the third quarter, despite the fact that total debt decreased by $74 billion. The primary reduction in overall debt came from a decrease in mortgage balances. However, as Americans are putting more money into paying off their homes, they are running up other debts. In addition to credit card debt, car loans increased by $18 billion, while student loan debt increased by $23 billion.
Despite the increase in debt, the American Bankers Association reported that defaults on credit card debt have decreased to an all-time low. However, TransUnion cautions that this decrease may be short-lived, as banks are starting to offer credit cards to higher-risk customers.
TransUnion, one of the three major credit bureaus, reports that the average American had $4,996 in debt in the third quarter. Credit card debt reached an all-time high in 2009, when the average borrower owed $5,776. Experts predict that debts will increase in 2013, with an average of $5,446 before December 31.
Credit card debt can be crushing. Minimum monthly payments often barely cover the interest charges, meaning that it takes people several years to pay off even small balances. The stress of not being able to pay the bills may negatively impact other aspects of a person’s life. One way to eliminate credit card debt and other unsecured debts is to file for bankruptcy. Eliminating some of that unsecured debt can help create some breathing room and give Americans the fresh start they need to get ahead.
Source: Time, “Why More Americans Will Fall Behind on Credit-Card Bills This Year,” Martha C. White, Jan. 7, 2013