Total U.S. consumer debt has surged to $5 trillion as of January, according to the latest G.19 consumer credit report from the Federal Reserve. This marks a slight increase from the previous month but showcases a 0.6% decline compared to a year earlier. Noteworthy is the 8.2% jump in revolving debt, primarily driven by credit card balances, while nonrevolving debt, comprising student and auto loans, grew by 3%.
Concerns Over Financial Stress
Tim Donovan, an analyst at Bankrate, noted that “small cracks are starting to emerge” in consumer sentiment. Despite continued consumer spending, concerns have escalated due to recent tariff issues impacting household budgets. He emphasized the growing unease among consumers, which has worsened over the past weeks.
Impacts of Tariffs on Consumer Prices
Experts warn that tariffs imposed on imports from countries like China, Mexico, and Canada are expected to raise consumer prices substantially. A recent survey signaled that approximately 86% of Americans anticipate these trade tensions will affect their finances, with 22% already preparing by stockpiling essential items, regardless of their financial situation.
Growth in Credit Card Debt
Credit card debt has reached a staggering $1.21 trillion, with 34% of cardholders expressing intentions to accumulate more debt within this year, as revealed in a February poll conducted by CreditCards.com. This uptick is concerning, especially as average credit card interest rates hover above 20%, nearing historical highs.
Strategies for Managing Debt
Donovan advises those struggling with credit card debt to consider balance transfer cards that offer long promotional periods with 0% interest. Such options—lasting 12, 15, or even 21 months—are crucial tools in addressing high-interest credit balances. Another effective strategy involves seeking assistance from reputable nonprofit credit counseling agencies, which can provide vital financial guidance.
In summary, the landscape of consumer debt in the U.S. is shifting, illustrating both resilience and emerging vulnerabilities, warranting keen attention from both consumers and financial experts alike.
