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Credit Card Debt Rises At Rapid Rate, Approaches Pre-Financial Crisis Levels

Over the past few years, the struggling economy has affected nearly everyone’s finances. For several years, consumers largely stopped making large purchases, and tightened their belts when it comes to spending. However, consumers now seem ready to buy again and the country’s spending habits are picking back up.

According to data from the Federal Reserve, outstanding credit card debt will hit $1 trillion during 2016. This is up from its all-time high of $1.02 trillion, a record set in July of 2008. The financial crisis struck in earnest around the same time.

The rise in credit card debt may be due to increased consumer confidence. People who feel secure in their jobs and have steady incomes are more likely to use credit, because they know that they can pay the monthly bill.

In addition to this, however, many banks have been attempting shore up their bottom lines and woo new customers with very low interest rates and pumped-up rewards plans. That is borne out by data from Equifax, which shows that lenders increased the number of credit cards issued in 2015 to 10.6 million—an increase of 25% from the previous year.

Lenders are also attempting to earn money by targeting less creditworthy borrowers. Many of the additional credit cards issued by these lenders went to people who may not have qualified for credit at the height of the recession.

As consumers become more willing to spend money, they are also getting worse at saving. In 2008, consumers were saving at a rate of about 4.4%. During the height of the financial crisis in December of 2012, that number rose to 11%. Currently, consumers are back to saving around 5.4% of their incomes.

While these figures are good news in that they are an indication of a recovering economy, consumers should still be wary about taking on too much credit. Much of the foreclosure crisis was due to lenders offering and buyers accepting credit agreements that they could not afford in the long term.

If you are considering applying for new credit, be careful to use only what you can pay off. If you are struggling with your debt, the South Florida attorneys at Loan Lawyers can help. To schedule a free consultation with an experienced debt defense attorney, contact our office today by calling (888) FIGHT-13 (344-4813).