As the housing market continues to remain stagnant, consumers are quickly racking up credit card debt and teetering the edge of instability, according to a report released today.
The average household credit card balance increased by $174 during the second quarter of 2014, now up to $6,802, according to a recent study by CardHub.
And this is expected to easily surpass the $7,000 mark during 2014, officially reaching levels not witnessed since the end of 2010.
"Assuming the above projection holds true, by the end of 2014 U.S. consumers will be roughly $1,300 away from the credit card debt tipping point, where minimum payments become unsustainable and delinquencies skyrocket," CardHub said.
This year’s second quarter increase was 46% higher than the next highest Q2 debt buildup, which was recorded in 2011. And it is nearly 200% higher than the increase witnessed in Q2 2009, when the country’s economy was just emerging from the Great Recession.
The year started off strong, with consumers actually paying down their credit card debt in a big way in the first quarter of 2014.
But this all quickly changed. “For the first time in the past six years, consumers reversed almost the entirety of their standard first quarter paydown during the second quarter of the year,” the study found.
To put it into numbers, the $28.5 billion in credit card debt incurred during the second quarter of the year wipes out more than 86% of the $32.5 billion paid off with the aid of tax refunds and annual salary bonuses from January through March.
Meanwhile, CardHub, said, “Consumers will charge-off on $30.35 billion in credit card debt during 2014. If that projection holds true, consumers will have defaulted on nearly $300 billion ($298.5 billion) in credit card debt since 2009.”
On the other hand, Bankrate also putt out a study reporting that more than six in 10 millennials do not have a credit card. But the ones that do are the least likely of any age group to pay their balances in full each month.
Only 40% of millennials pay their entire balance every month, compared to 53% of adults 30 and older.
"Many millennials are already battling with student loans, which likely makes them even more wary of the potential for debt," said Jeanine Skowronski, Bankrate’s credit card analyst.
