When it comes to debt, it seems, Americans have a short memory. And that’s dangerous.
Proof of this comes from a report by card-industry information website CardHub.com, which reveals that US consumers are on pace to rack up nearly $47 billion in new credit-card debt this year.
That would bring the total amount of credit-card debt incurred from the beginning of 2011 through the end of 2013 to nearly $130 billion.
Bottom line: Many have forgotten the woes of credit-card holders who couldn’t pay their bills in the last recession — with disastrous results.
This ominous forecast comes despite US consumers having actually paid down nearly $32.5 billion in existing credit-card debt during the first quarter of 2013.
A significant decrease in consumer debt is common during the first quarter of the year, as that is typically when people receive annual salary bonuses and tax refunds as well as shift their focus to paying off purchases made during the busy holiday shopping season.
However, we paid off 7 percent less this year than we did during the first few months of 2012, when we finished with a $35.8 billion net increase in credit-card debt at year’s end.
In fact, 2013 is actually shaping up a lot like 2011, when we began the year with a $32.7 billion pay-down and ended it having not only reacquired that amount in debt, but also added $46.71 billion on top of it.
Here are some other lowlights from the CardHub report.
* The first quarter of 2013 marked the first time in a year that consumers did not reduce their total debt relative to the corresponding quarter the year before.
* The average US household currently has $6,591 in credit-card debt.
As CardHub CEO Odysseas Papadimitriou points out, “The numbers indicate that we’re starting to regress a bit, and that’s something that must be addressed before debt levels rise to the point where consumers can no longer sustain them and we default in droves.”
After her close call with financial disaster, Giselle Pacheco, 30, of Bergenfield, NJ, recently paid down $6,000 in card debt.
“When my husband and I went to get a mortgage, I was told my credit was bad and we couldn’t get [one],” explains Pacheco, a financial-aid officer at LaGuardia Community College in Queens.
So she jettisoned most of her cards, then concentrated on wiping out the remaining balances over six months.
“I made big payments each month, far more than any minimum,” she says. “I paid off the [card with] the highest interest rate first.”
Pacheco adds that she now pays off her entire card balances each month.
Oh, and Pacheco and her husband now own their own home.