Personal credit debt in the US reaches all time high

As of the end of June this year, US consumer credit-card debt has surpassed a record set just before the global financial system almost collapsed in 2008.

Data from the Federal Reserve shows that outstanding loans reached $1.02 trillion the largest credit-card debt ever recorded in the US. However, the US consumer appears ready to spend even more as retail sales rose the most in a month this year in July according to a recent report. Ryan Sweet an economist at Moody's Analytics Inc. said: “Consumer spending has perked up. The third quarter is off to a good start. There’s really not a lot to complain about in this report.” Lenders such as Citigroup and JPMorgan Chase are competing to sign up even more consumers for their credit cards.

There is no sense that the situation will end badly as it did in 2008 when after home prices plunged and the jobless rate went towards ten percent, banks had to write off more than $100 billion in bad loans. However credit-card issuers have noted that write-off rates went up in the second quarter compared to the previous three months. The economy appears to be chugging along and unemployment is low as well as interest rates. The situation does not look anything like 2008 yet.

Total US household debt was also up in the second quarter even after it had passed its pre-crisis peak even earlier in the year. Debt went to $12.84 trillion in the second quarter ending in June. This was $552 billion more than just a year ago. The delinquency rate at 4.8 percent was the same as in the first quarter although credit card delinquency rates increased. In the report economist Andrew Haughwout said of US credit-card debt: "The current state of credit card delinquency flows can be an early indicator of future trends and we will closely monitor the degree to which this uptick is predictive of further consumer distress."

Mortgage debt was $8.29 trillion in the second quarter, $329 billion more than last. Student loan debt was also up $85 billion at $!.34 trillion. Auto loan debt was up also by $55 billion to $1.19 trillion.

According to a report from the Federal Reserve Bank of New York, credit-card debt rose 7.5 percent in the second quarter this year to $784 billion. This is a lower total than given by the Federal Reserve for some reason. Also, the percentage of credit card balances at least 3 months behind in payments rose higher than a year earlier at 7.38 percent. While these levels are not near those during the financial crisis, they are a cause for concern and will complicate the Federal Reserve's assessment as to whether they should raise interest rates.

Matt Schulz, a senior analyst for Credit Cards.com said:"Late payments are slowly rising but they're still low by historical standards. That means that most people are handling their card debt well even as it grows...Even if you feel your debt is manageable right now, know that you could be one unexpected emergency away from real trouble. Get that debt paid down while things are good so you can be better prepared if things turn for the worse."