Household debt soars at fastest pace in 15 years as credit card use surges, Fed

[Davidvictorson]

In the US, the Federal Reserve reports that households increased debt during the third quarter at the fastest pace in 15 years. due to hefty increases in credit card usage and mortgage balances. The biggest contributors to that debt load are:

• Mortgage balances- it rose from $1 trillion a year ago to $11.7 trillion
• Credit card debt, which climbed to $930 billion which is more than 15% from the same period in 2021. This largest annual jump in more than 20 years
• Auto loan balances is up 5.6% from a year ago.

According to the report the reasons for this are because of “very robust” consumption, rising prices and consumers using substantial levels of savings that remain on accounts.

On a personal note, I think this is the time for introspection. A lot of persons are buying stuff they do not need using their credit cards(money they do not yet have) because they want to impress people they do not like or people who do not give a rats ass about them. Understand the times we are in and live within your means because 2023 is coming and if you are affected economically and you have no back up plan, how would you pay off those debts?

Please share your personal experiences the strategies you employ to avoid getting in debts.

[Mahanton]

On a personal note, I think this is the time for introspection. A lot of persons are buying stuff they do not need using their credit cards(money they do not yet have) because they want to impress people they do not like or people who do not give a rats ass about them. Understand the times we are in and live within your means because 2023 is coming and if you are affected economically and you have no back up plan, how would you pay off those debts?

Please share your personal experiences the strategies you employ to avoid getting in debts.

Im actually guilty when it comes to improper use of credit cards.I already learned a lesson after than which you should really be that mindful on spending and repaying on what you owe
so that you wont really be fucked up in the end of the day or into those due dates.You might really be finding it to be not too big issue for you to mind on but when the time comes
which you unconsciously just ignored it out then this is where problem do begins.

I had already paid up all of my debts gradually and never ever tend to make use or buying up things which isnt really that needed.You would be finding yourself
in big trouble if you are really that too impulsive on buying specially on using up your credit card.

[Die_empty]

Please share your personal experiences the strategies you employ to avoid getting into debt.

I am also very surprised to see how easy it has become to have access to credit and loan facilities in my location. The introduction of Bank Verification Number and National Identity Numbers have made it very easy to get credit facilities from banks because defaulters can be easily tracked. Currently, people can buy almost everything on credit and it has made people indebted.

I had the hunch during the Covid 19 lockdown that the world would go through serious economic challenges and I started preparing for it. I ensured my family cut down on our expenses so that we would not spend our major income on debt servicing. The best advice is to focus on your basic needs and give less or no attention to luxury or wants.

[Fortify]

In the US, the Federal Reserve reports that households increased debt during the third quarter at the fastest pace in 15 years. due to hefty increases in credit card usage and mortgage balances. The biggest contributors to that debt load are:

• Mortgage balances- it rose from $1 trillion a year ago to $11.7 trillion
• Credit card debt, which climbed to $930 billion which is more than 15% from the same period in 2021. This largest annual jump in more than 20 years
• Auto loan balances is up 5.6% from a year ago.

According to the report the reasons for this are because of “very robust” consumption, rising prices and consumers using substantial levels of savings that remain on accounts.

On a personal note, I think this is the time for introspection. A lot of persons are buying stuff they do not need using their credit cards(money they do not yet have) because they want to impress people they do not like or people who do not give a rats ass about them. Understand the times we are in and live within your means because 2023 is coming and if you are affected economically and you have no back up plan, how would you pay off those debts?

Please share your personal experiences the strategies you employ to avoid getting in debts.

It's crazy but perhaps unexpected after so much chaos in the last few years. First there was Covid, which had a simultaneous effect of forcing some people to stay at home (thereby saving huge costs and limiting spending) while also putting other people out of a job entirely for up to two years. People are generally quite bad at managing finances beyond the very basics with long term savings buffers being relatively small for a large part of the population. Now the Ukraine war has kicked off it has pushed up food and energy prices further, just as things looked like they were starting to normalize. Combined with China's continuing zero Covid random shutdowns of factories and entire cities, it's all stacking up into a rather big mess.

[Findingnemo]

In the US, the Federal Reserve reports that households increased debt during the third quarter at the fastest pace in 15 years. due to hefty increases in credit card usage and mortgage balances. The biggest contributors to that debt load are:

• Mortgage balances- it rose from $1 trillion a year ago to $11.7 trillion
• Credit card debt, which climbed to $930 billion which is more than 15% from the same period in 2021. This largest annual jump in more than 20 years
• Auto loan balances is up 5.6% from a year ago.

According to the report the reasons for this are because of “very robust” consumption, rising prices and consumers using substantial levels of savings that remain on accounts.

On a personal note, I think this is the time for introspection. A lot of persons are buying stuff they do not need using their credit cards(money they do not yet have) because they want to impress people they do not like or people who do not give a rats ass about them. Understand the times we are in and live within your means because 2023 is coming and if you are affected economically and you have no back up plan, how would you pay off those debts?

Please share your personal experiences the strategies you employ to avoid getting in debts.

I believe inflation rate has something to do with that so the figures are a lot higher than it used to be, credit card is awesome for someone who knows how to use it but its really a trap for people who don't have any knowledge about money management, current lay off and pay cut due to post covid.

Delayed gratification is the key to avoid the debt, for example if we want to own the iPhone 14 then we should make money by working hard to get that small gadget in the meantime we may realize donwe really need that stuff or can we do something better with this money.

[Gayong88]

No one wins here but having a well-defined monthly budget and sticking to it will help you stay out of debt. Indeed, there are many possible causes of debt, but there are also steps you can take to overcome this problem. Before you decide on a solution, you should think about the root causes of your debt and then identify corrective actions that will help you get rid of debt.

[DaveF]

I think the numbers are a *bit* misleading.

The mortgage numbers are interesting but for a lot of people it became an investment. Remember these numbers are this year vs last year.

How many people went out and took out as much money as they could borrow against their homes at 4% thinking that within a year to 18 months they could be getting 5%+ in the short term and even longer in the long term?

How many people were waiting for the current housing shrink / price drop to happen to buy?

Same with credit cards. If you have good credit just about every bank is still throwing 0% for 9+ months or longer offers around.
If I could leave those funds in a savings or checking account or put it in a CD at the 1.5% +/- rates that were around a year ago I *might* do it. It's a tough call. At the 3% (savings) to 4.5% or better (CD) rates that are around now, it's a no brainier. You want to give me money at 0% that I can invest no risk and get 3%+ on give it to me. So credit card debt goes up.

So taken in a bubble the numbers look like one thing, looking at all the external factors makes them look different.

-Dave

[BRINIRHA]

to face the ongoing global economic crisis. and we do not know how long the economic crisis that has hit almost the entire country will end.
But what is clear is that we must try not to create debt in a situation like now. because when the economy gets tougher then people will have a hard time paying their debts.

However, the increasing use of credit cards is also triggered by the increasingly expensive prices of necessities, so we need to spend more money. so for some people even consider debt as a solution even though this step is actually wrong. but sometimes situations and conditions can force a person to do something that he even knows is wrong.

And the solution to survive in the current economic conditions is to start managing finances and managing needs. reduce the glamorous life, and prioritize primary needs.
only buy what is really needed. Changing your lifestyle to be more frugal is difficult at first. however it takes some getting used to at this point. because we are on our way to a Recession. we must be ready when the time comes.

[Rruchi man]

A lot of persons are buying stuff they do not need using their credit cards(money they do not yet have) because they want to impress people they do not like or people who do not give a rats ass about them.

Can we say that it is social media that has contributed to this majorly as well as some other factors? The pressure of wanting to meet up, and the uncontrollable desire to buy things you do not need just for show off. Many people have become victims to this pressure are as a result are now in debt that is becoming frustrating to them.

There are also some narratives that have been encouraged and accepted by people as a result of it. A few popular one's are;
- The notion that it is impossible to be completely debt free.
- The notion that everyone is in debt.
- The notion that rich people are highly indebted, so it is also okay to be in debt.

[dothebeats]

I have started to decrease my monthly spendings on my house. I live alone, with some pets, and it costs me less than $500 to live comfortably (excluding rent which is another $500). Everything is extremely expensive nowadays that I forego my trusted brands to something less known, but still does the same thing. You can feel the effects of these economic downturns in a very personal level, and if people still keep on using credit cards whilst not being able to pay back what they owe, the system will just implode, and we'll all find ourselves f'd in the ass.

[Darker45]

I don't want to jump right into the conclusion that the rise in mortgages and credit card and other debts is caused by people buying stuff they don't need. It's possible they really need a house or a car or some stuff but since they cannot pay it with cash, they are forced to pay it with credit. I mean, you know how hard the times are right now.

As for me, I prefer not to borrow or take a loan or buy some stuff with a credit card. Hell, I don't even have one. My strategy? Only buy stuff I need and can afford.

[wxa7115]

On a personal note, I think this is the time for introspection. A lot of persons are buying stuff they do not need using their credit cards(money they do not yet have) because they want to impress people they do not like or people who do not give a rats ass about them. Understand the times we are in and live within your means because 2023 is coming and if you are affected economically and you have no back up plan, how would you pay off those debts?

Please share your personal experiences the strategies you employ to avoid getting in debts.

Im actually guilty when it comes to improper use of credit cards.I already learned a lesson after than which you should really be that mindful on spending and repaying on what you owe
so that you wont really be fucked up in the end of the day or into those due dates.You might really be finding it to be not too big issue for you to mind on but when the time comes
which you unconsciously just ignored it out then this is where problem do begins.

I had already paid up all of my debts gradually and never ever tend to make use or buying up things which isnt really that needed.You would be finding yourself
in big trouble if you are really that too impulsive on buying specially on using up your credit card.

While sometimes consumers find themselves in those troubles through no fault of their own, as they need to pay medical bills due to an unexpected accident or disease, many times this is because they are simply unable to control their spending.

However banks are also responsible for this, since they tempt people to spend way more than what they can afford by offering credit cards that people did not even asked for, as an example since the pandemic started I have received six different offers for credit cards and I did not apply for a single one of them, obviously I ignored them and I was able to keep myself out of trouble, but if such an offer falls on the lap of someone that is having some economic problems then it is obvious they are going to take their chances and use it, compounding their economic problems in the process.

[Poker Player]

I think the numbers are a *bit* misleading.

The mortgage numbers are interesting but for a lot of people it became an investment. Remember these numbers are this year vs last year.

How many people went out and took out as much money as they could borrow against their homes at 4% thinking that within a year to 18 months they could be getting 5%+ in the short term and even longer in the long term?

How many people were waiting for the current housing shrink / price drop to happen to buy?

Same with credit cards. If you have good credit just about every bank is still throwing 0% for 9+ months or longer offers around.
If I could leave those funds in a savings or checking account or put it in a CD at the 1.5% +/- rates that were around a year ago I *might* do it. It's a tough call. At the 3% (savings) to 4.5% or better (CD) rates that are around now, it's a no brainier. You want to give me money at 0% that I can invest no risk and get 3%+ on give it to me. So credit card debt goes up.

So taken in a bubble the numbers look like one thing, looking at all the external factors makes them look different.

-Dave

The problem with that you comment is that numbers are one thing, and Average Joe's behavior is another. From a purely mathematical point of view, it makes sense that they lend you money at 0% and you invest it for a higher interest rate, but that equation does not take into account risk, and on the other hand it also does not take into account that most of the population goes on what I call a "liquidity binge".

Are you telling me that most Americans are borrowing more because they are financial geniuses and are profiting from the interest?

I don't think so, because the money that the people I know are borrowing is not enough to make a difference. Typical person who has a median to low income, a net worth of $30k (mostly in equity in his home), and only $1k in the bank, who decides to buy a $1k Iphone in installments at 0% interest to "not decapitalize", when in reality he has virtually no capital, and if the move goes well, and they give him 1% for that $1k he has in a savings account, at the end of the year he gets the grandiose amount of $10! Lol.

In the end most do not spend the cash available on an investment but on stupid consumption, and then comes the whining.

[TimeTeller]

I don't want to jump right into the conclusion that the rise in mortgages and credit card and other debts is caused by people buying stuff they don't need. It's possible they really need a house or a car or some stuff but since they cannot pay it with cash, they are forced to pay it with credit. I mean, you know how hard the times are right now.

As for me, I prefer not to borrow or take a loan or buy some stuff with a credit card. Hell, I don't even have one. My strategy? Only buy stuff I need and can afford.

When the pandemic hit us, I believe most people learn a thing or two owed to this crisis.
So right now, a lot are into debt and using their credit card because they have no spare cash to pay.
And yes, the only option for them is to use their credit card and so the usage of credit card surges.
But I do believe that these people need it not just because they want it.
Same here, when I cut my use of credit card long time ago, I haven't applied for another one.
Your life will be more at peace if you are just living what you have and not going into debt because you are spending via your credit card.
The interest and the stress brought about by this is not worth it. So for me, live within your means and not aim for luxury if you can't afford.

[Hydrogen]

Understand the times we are in and live within your means because 2023 is coming and if you are affected economically and you have no back up plan, how would you pay off those debts?

The best strategy people can have is "tax the rich, eat the rich sell things to the rich". The wealthy are usually not intelligent enough to spend their funds wisely and love to buy expensive and overpriced junk. Brand name luxury items from overpriced luxury stores are a prime example. Gucci, armani, rolex, versace, etc. These luxury items are never good investments or intelligent ways to allocate wealth. And show how the wealthy often have impulsive spending habits, where they will pay top dollar for overpriced garbage that will only depreciate in value over time.

These spending habits apply to ebay and many open markets across the internet. You might think that no one would buy x, y or z for a high price. But there are often rich and wealthy people who will pay a higher price for what things are worth if they see it. Which opens the door to craftsman and makers being able to produce products which will sell at a higher price than expected.

To cite one example, this youtuber bought a stainless steel nut for less than $1 dollar. Grinded and buffed it into a stainless steel ring, which he then resold for $1,000.

https://www.youtube.com/watch?v=xQl2Yn6Hzq8

Of course, this was years ago and since then jewelry markets have been flooded with copycats which no longer makes it possible to reproduce.

But it still shows how someone with a little imagination, tools and skills can resell items to the rich for much more than they're worth.