Here’s why consumer credit card debt is at a record high

young woman talking on a mobile phone and holding a credit card
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You might be able to look at your bank statements for confirmation, but if you didn’t already now, credit cards are having a moment. Consumers are swiping (and inserting the chip) like never before and credit card companies are benefitting big-time.

The Federal Reserve says in its report released Tuesday that credit card debt for September again eclipsed $1 trillion, a mark that it has hit twice this year already. The figure matches the previous high set during the Great Recession of 2008. To put it another way, Americans currently have the highest credit card debt in history.

It’s a particularly dangerous time for consumers: We’re currently in the holiday season, the one time of the year when shoppers are most likely to splurge and over-extend themselves. If you have been trying to pay off your balances, it’s probably about to get a lot tougher.

Consumer credit card debt hits $1 trillion

The Federal Reserve said that total consumer debt jumped $20.8 billion in September, thanks to revolving debt, including auto and student loans, which rose by $19.3 billion in the third quarter alone. All those numbers mean consumers are borrowing more and that we’re heading into the stretch run of  the holidays already in the red — and we don’t mean Santa’s suit.

How did we get here? At the end of 2016 and beginning of 2017, credit card companies scanned the economic landscape — new U.S. president, stable consumer confidence, new year — and made a concerted effort to increase the borrowing power of Americans.

You know that popular Oprah gif (You get a car! You get a car! You get a car!)? That’s what basically happened for U.S. consumers.

A report from Transunion in the spring said that first quarter 2017 figures showed that “over 171 million consumers had access to a bankcard, the highest level TransUnion has observed since 2005.” The credit-reporting agency said that of these, 16.33 million were subprime consumers.

Translation: For many of those approved to borrow, it didn’t really matter what shape their credit was in. Transunion said the catch is that while more people got credit, they have lower spending limits, a small-print caveat that makes people think they can handle their debt.

Money expert Clark Howard says the key to paying off credit card debt is to make it a priority. “I usually find setting a goal of paying down debt in 36 months or less works best for people,” he writes. “If the end goal is any further out than that, people tend to lose their focus.”

The  Clark Howard guide to paying off credit card debt

“Once you decide to make your debt a priority, you need to start paying more than the minimum monthly payments. That will allow you to eliminate the debt faster, save money on interest — and most importantly, stay motivated to get the job done and behind you!” Clark says.

Credit card debt can eat you alive, if you let it. The card issuers have a vested interest in getting you to spend more and more, but it doesn’t have to be this way.

 Three sure-fire ways to tackle credit card debt

  • ‘Skip a payment’? No thanks: No thanks Many banks and stores will send you a promotion that lets you “skip a payment.” Don’t fall for it. It’s just an easy way for your outstanding balance to accumulate additional interest, which adds to your debt.
  • Pay up every 14 days: If you can, try to pay something on your credit card bill every 14 days. If you can sync these payments to your bill due-date cycle, you can shrink your balance much quicker.
  • Don’t close that card: Resist the temptation to close the credit card once you’ve paid it down. The three major credit-reporting agencies put a lot of credence into consumers who are able to responsibly hold onto their credit cards without going into debt. Basically, it can increase your credit score if you have credit cards with zero balance.

RELATED: Here are 3 OTHER ways to tackle your credit card debt

6 rules to stay debt free

Craig Johnson is a conscious money-saver who stills read paperback books and listens to vinyl. He likes to write about how technology is making things easier and more affordable — but also sometimes more dangerous — for the modern consumer.
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