Have a look at outstanding revolving credit (almost all of which is credit card debt) over the past eight years:
Source: Federal Reserve.
Two things stick out:
- Holy smokes: Credit card debt has dropped precipitously. That's great news! It's step one in repairing household balance sheets, which were pillaged over the past decade.
- As large as that drop appears, credit card debt is still about where it was in 2006. By any measure, that was a time of debt gluttony and irresponsibility. Nominal GDP is about 7% higher today than it was back then, so the comparison isn't perfectly apples-to-apples. But the 2007-2008 spike in debt was so fierce that even a large decline in total credit card debt only brings us back to still-bubble-year levels. There's more work to do, in other words.
There are four main reasons credit card debt levels have fallen so quickly. One, consumers are paying it off. That's obvious. Two, they're defaulting on it in droves, which has become a convenient way to shed debt. Three, credit card giants like Citigroup
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