Americans once again increased their credit card balances in August, adding $4.2 billion to their balances from July, according to the Federal Reserve. The August rebound comes along several other financial improvements.
In September, unemployment fell below 8 percent to rest at 7.8 percent. Also, rising stock prices and asset valuations sent American net worth back to a pre-recessionary high. Americans now have a household net worth of $62.7 trillion.
The rise in credit card debt follows along with impressive gains in consumer retail sales. Typically, retail sales and credit card debt share a direct relationship where a change in retail sales is met with an equal change in credit card balances.
While Americans continue to shed high-interest credit card balances, balances in other categories trend higher. August credit card debt was 17% lower than the all-time high in 2008. Student loans, car loans, and other lending continues to drive the amount of total borrowing by consumers even higher. Consumer debt now rests at $2.73 trillion, however, this level of debt is now more affordable than ever; consumers dedicate less than 11% of their income to debt service payments – payments made to stay up-to-date on their debt balances.
Consumer balances tell analysts a lot about the state of the credit card industry. As credit card balances dwindle, credit card companies boost competitive practices including zero-interest borrowing offers to push consumers to use plastic where they might otherwise use cash. More credit card spending and carried balances point to an improving economy.