U.S. credit card debt at highest level in a decade

Feeling more optimistic about their financial prospects, Americans are firing up their credit cards.

As U.S. consumer confidence hits a 15-year high, credit card debt is expected top $1 trillion in 2017, its highest point in more than a decade, according to a forecast from WalletHub. Total outstanding credit card debt was $978.9 billion as of the fourth quarter of 2016, up 7 percent from the previous year and approaching the $981.8 billion people had wracked up by 2007 before housing crash.

Although charge-off rates remain near historic lows, indicating that many Americans continue to pay their credit card bills on time, WalletHub analyst Jill Gonzalez worries that people are putting major expenses like their rent and mortgage payments on plastic.

“Something’s got to give,” she said by email “Credit will begin to tighten up soon.”

Scott Hoyt, an economist at Moody’s Analytics, isn’t ready to hit the panic button just yet. He notes that the nation’s debt service ratio, which measures debt payments as a percentage of total disposable income, is at a 35-year low.

“Credit card debt is a relatively small piece of overall consumer obligations,” Hoyt said. “Right now consumers are not overly indebted. For everyone, I know what’s important isn’t how much they owe but what the payments are.”

Still, rising levels of debt could make millions of Americans more vulnerable if the economy stutters. Economsts say inflationary pressures are building, even as wage growth remains muted. For instance, the national average price for a gallon of unleaded gas is about $2.30 per gallon, a 45 cent increase over last year, though still well under the high of $4.10 seen in 2008, according to GasBuddy. 

As many as 10 million people also could lose their health care coverage under a House Republican plan to repeal and replace Obamacare. That could raise out-of-pocket medical costs, making it harder for some households to stay current on their credit card bills.

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    Jonathan Berr is an award-winning journalist and podcaster based in New Jersey whose main focus is on business and economic issues.