Mellody Hobson on our ballooning debt

Outstanding credit card debt in this country is suddenly closing in on the $1.02 trillion record set just before the financial crisis in 2008.

This growing debt is being driven by two main factors: 

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CBS/iStockphoto

First, we’re buying more. Consumer confidence continues to climb and so are wages. And yet, since our incomes aren’t keeping up with the cost of living, we are -- once again -- using credit cards to bridge the gap. 

And, banks are aggressively pushing plastic all over again. 

Credit cards are one of the few businesses that have been consistently profitable, so banks are hoping to capitalize on our renewed appetite for credit.

But consider this: more and more card offers are going to people most at risk of being burned by credit card debt.  According to the credit rating agency Equifax, credit card companies issued more than 10 million cards to subprime borrowers last year -- that’s up 25% from 2014. It’s now at its highest level since 2007.

And it isn’t just credit card debt that’s growing; total household debt, including mortgages, is rising fast, too. 

But our mix of debt is changing. A decade ago, a much-larger percentage of total debt was from credit cards. Now it’s more heavily weighted toward mortgages and student loans. 

Whatever the source, there are warning signs that, once again, we’re taking more financial risks. And that’s something for all of us to think about. 

       
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  • Mellody Hobson

    View all articles by Mellody Hobson on CBS MoneyWatch»
    Mellody Hobson is President of Ariel Investments, a Chicago-based money management firm that serves individual investors and retirement plans through its no-load mutual funds and separate accounts. Additionally, she is a regular financial contributor and analyst for CBS News and CBSNews.com.