The Recent Decline in Americans' Credit Card Debt

The Federal Reserve recently announced sharp declines in the level of credit card debt Americans are now carrying. "Revolving debt- (mostly made up of credit card debt) shrank by almost 10 percent in February, the most rapid rate of decline in more than 30 years. In terms of raw numbers, revolving debt fell by $7.8 billion. Essentially, this means almost $8 billion in credit card debt vanished in one month alone.

These numbers have been on the decline for some time now. In October of last year, Americans' credit card usage stayed flat. In November, it dropped 3.4 percent. In December, revolving debt shrank at an annual rate of 8.2 percent. The total debt remaining is still no small figure, mind you. At the end of this February, consumers owed a combined total of more than $2.5 trillion, not including real estate debts. To put this into perspective, when the total was only $973.5 billion in November 2008, this translated into $3,186 in credit card debt per person, or $8,282 per household. Using the current figure, those numbers would more than double.

Nonetheless, some in the financial industry are saying this trend shows that people in debt are spending less, not seeking new forms of credit, and paying down their credit card debts in earnest. While this would certainly be a good thing for people struggling with debt, it's probably not realistic to think this is happening in significant numbers.

Scores of people are losing their jobs every day. Those who still have their jobs are dealing with pay cuts, rising costs of goods and services, reductions in benefits, and retirement pensions in jeopardy. And, there is no reason to think people aren't seeking new forms of credit; those juggling unaffordable debts will always be looking for other ways to make ends meet until the debts are gone. What's worse, with less traditional types of credit available to them, they might be turning to other riskier types -“ like payday loans and cash-checking services.

How many of these people are really going to take whatever cash they have at the end of the month and send it to a credit card company to pay off some extra interest? Probably not too many. Indeed, the delinquency rate for credit cards was 5.56 percent in the fourth quarter of last year. That's up 4.54 percent from the year before, and stands as the highest delinquency rate on record.

What a lot of people are doing, however, is filing bankruptcy to get rid of credit card debt. Almost 1.1 million people filed for bankruptcy in 2008, and even more are expected to file this year. In fact, filings under Chapter 7 this February were up 37 percent over last year. This has led to massive charge-offs, as creditors have been forced to wipe their balance sheets clean of billions of dollars debtors have discharged in bankruptcy. Figures from 2008 show creditor charge-offs rose to $6 billion, up from $3.6 billion a year ago. And the recent spike in bankruptcy filings undoubtedly played a significant role in the $7.8 billion in revolving credit that disappeared this February.

If you're in this boat, it's time to consider bankruptcy yourself. With vital interests at stake -“ like your income, health benefits, retirement plan -“ you can't afford to just keep throwing money down the drain with interest payments to credit card companies. And you don't have to. Bankruptcy was designed to give people like you a fresh start. Call a Raleigh bankruptcy attorney today, and join the millions who have gone before you.