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Federal Reserve reveals worrying increase in credit card debt

On Behalf of | Oct 16, 2017 | Chapter 13 Bankruptcy

Consumer spending in Texas and around the country was subdued in August according to a report released recently by the U.S. Federal Reserve. Total consumer debt in the United States increased by $17.7 billion in July according to the central bank, but only $13.1 billion was added to the nation’s debt total in August. However, a closer scrutiny of the figures reveals a potentially worrying increase in credit spending and a sharp decline in student and automobile loans.

Consumer spending is watched closely by experts as it accounts for about 70 percent of American economic output, and how people are spending their money can be just as significant as how much they are spending. Increased spending on big-ticket items like cars indicates that the economy is thriving and consumers are optimistic, but increasing revolving debt during periods when other forms of consumer spending are restrained may suggest that many Americans are using their credit cards to cover the costs of basic necessities.

According to the Federal Reserve report, the annual growth rate of consumer installment loans fell from 6.9 percent in July to just 3.2 percent in August. However, credit card spending is now on pace to grow at a rate of 7 percent for the year. This figure stood at 3.2 percent at the end of July. These figures have raised concerns among economists and prompted them to scale back their predictions for economic growth from 3.1 percent to 2.1 percent.

Individuals or families sometimes turn to credit cards to make ends meet because they feel that they have few other options. This kind of behavior rarely leads to happy outcomes, but pursuing debt relief by filing a Chapter 7 or Chapter 13 bankruptcy petition could help consumers to regain control of their financial situations and offer them the possibility of a fresh start.