According to the Federal Reserve, Americans borrowed an additional $16.2 billion between December and January, mostly in the form of automobile and student loans. This brings the total amount of consumer debt up to $2.8 trillion, which is the highest it has ever been. However, the amount of credit card debt remained essentially the same, only increasing by $106.1 million for the entire country.
Credit card debt is approximately 17 percent below its peak, which occurred in 2008. Some analysts believe that the leading cause of reduced credit card use stems from the recent tax increase that took effect at the beginning of this year. Following the tax increase, people making $50,000 per year will take home $1,000 less this year, and households with a pair of high income earners will have about $4,500 less.
Analysts believe that improving job numbers and income may offset the tax increase, leading to a net gain in take-home pay. However, household debt rose 2.4 percent in last year’s final quarter, which is the largest increase in almost five years.
As some people continue to struggle in a tumultuous economy, it is all too easy for them to end up with enormous amounts of debt. Between paying for necessities and dealing with large credit card balances from before the economic downturn, some people are simply not able to pay off their debts. In Tennessee, people in these circumstances may benefit from speaking with bankruptcy attorneys who may help them understand their choices and guide them through the filing process to arrive at the best possible outcome and prevent debts from becoming crushing.
Source: Fox News, “US consumer debt up $16.2 billion in January, led by gains in student and auto loans category” March 7, 2013