As the elements of the recession continue to wane, more Americans still feel uneasy about chronic credit card use – and it shows in the ever-decreased amount of total credit card debt that they hold.
In June of 2008, the total amount of credit card debt stood at approximately one trillion dollars. As of this month, the total amount of debt is reported to be approximately 860 billion dollars. This reduction in debt has been caused by several factors: a reluctance of Americans to borrow money during tough economic times, additional amounts of saving that have occurred and have helped reduce the amount of emergency credit card usage and an increase in debt write-offs as financial institutions relinquish delinquent debts.
Still, other forms of debt have remained high or have increased in recent years, which may explain why credit card debt as an individual metric has been on the decline. The average mortgage debt remains high but lower than its 2008 average ($148,000) and average student loan debt has continued to sky-rocket ($32,000).
Industry analysts have reported that there are clear positive and negative trends afoot with the reduction in credit card debt. Americans do seem more reluctant to use credit cards as a form of consistent spending, due to an ever-looming fear of tough economic times. In addition to this, savings rates have increased dramatically over the past five years. As time progresses, however, more individuals will likely become comfortable with borrowing once again.
The biggest worry that industry analysts forecast could cause problems is the emerging student loan bubble, which has exploded at the same time that credit card debt has decreased. Many individuals have sought to improve their chances in a tough job market through continued education. Combined with the increases in college education costs, student loan debt now is larger than credit card debt for the first time in American history. An economic downturn that results in the defaults of hundreds of thousands or millions of student loans could have dramatic impacts on the US economy, similar to the housing bubble implosion in 2007.