During the aftermath of the economic recession, many Americans put away their credit cards and drastically cut back their spending. Many Wisconsin residents saw their neighbors lose their homes to foreclosure or lost their jobs and simply didn’t feel comfortable using credit cards as frequently for purchases.
However, in recent years the economy has made improvements, the unemployment rate has dropped and people are feeling more financially secure. As a result, new data shows that consumer debt spiked in April, reaching over $5 billion for the first time in more than half of a decade.
What that means is that Americans are once again less hesitant to pull out their credit cards for purchases large and small. While some people point out that this is a positive sign for the economy, experts are quick to point out that there is a darker side to credit card use.
A finance and economics writer explained that credit card debt is temporarily good for the economy, but it is not sustainable for economic growth. That’s because when consumers rely on credit cards for purchases they often have to cut spending later to pay back the debt along with high interest rates.
Additionally, credit card debt is one of the leading reasons Americans file for bankruptcy protection. For many people who file for bankruptcy because of credit cards, the debt spiraled out of control and reached a level that was impossible to pay back.
With the recent spike in credit card use, it is likely that some people in Wisconsin and the rest of the country will get in too deep with debt and will depend on debt relief options such as bankruptcy for assistance.
While no one wants to go through bankruptcy, it can be the only option and can provide a fresh start to Americans who desperately need it.
Source: Reuters, “Consumer debt spiked in April,” Shane Ferro, June 10, 2014