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Families are deep in debt
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But families seem to be in financial danger, again.

Some people say that credit card debt is the next tsunami? How true could that be? How bad is the situation for the American families? How bad is it for you?

Let me give you some fast figures.

Total credit card debt as of December 2013 was $856.8 billion. It reached $925 billion in September of 2015. In January 2019 it is $1.03 trillion.

The figure, reported monthly by the Federal Reserve, is the total amount of revolving credit balances held by financial institutions.

Average credit card balance by family as of January 2019 is $6,348, according to Experian. Average credit card balance by family at the end of 2014 was $15,799.

Number of American holding credit cards at the end of 2014 was $55 billion. Number of Americans who actively use credit cards as of 2018: 176 million, according to Transunion.

Three years ago 13.9% in average of consumer expenses went to pay credit card debt. Today, 13.9% to 8.3% of family income below $52,700 per year goes to pay only interest. Americans are paying over $113 billion in credit card interest and fees only, up 49% from 5 years ago.

Delinquency rates peaked in 2009 at nearly 7%, but in 2018 they have remained below 2.5%.

Average APR: 16.86%

We have a mixed situation but what the data shows is that undobtedly credit card debt is strongly on the raise. What is interesting is that there are many new borrowers. We have gone from 55 billion to 176 billion of borrowers. But each one holds less credit than a few years ago, $6,348 instead of $15,799. This has resulted overall in an increase in credit card debt which is now more than $1 trillion.

We have learned individually to manage credit better, but as a society we are much worse.

On the other hand even what we are paying now per family in average, $6,438 is a bigger part of family income, because family income have shrunk. But, again, as a society, what we pay in interest for credit cards is 49% higher than 5 years ago.

So, the situation is very tight in both absolute and relative terms.

What if another recession strikes?

What could happen is that this new bubble bursts. That is called a debt deflation, after Irving Fischer, an american economist from the 1930's. As the recession begins to unfold, people begin to default on their credit obligations. This in its turn causes more economic contraction and more defaults. Until you have a full fledged recession.

What can you do?

One full hour of free consultation

Make an appointment with me.

I will sit with you for an hour of initial consultation, where we will go extensively over your whole situation and predicament, free of charge. I will explain to you all the requirements and consequences of different strategies. I will tell you for which strategy you qualify.

The free consultation does not put you under any obligation to me. You are free to get other opinions, and decide after you have shopped around.