Americans Are Borrowing Again

When the financial crises of 2008 began, and America was sent into the worst economic decline since the Great Depression, Americans put the brakes on borrowing.  Certainly the banks did their share to keep people from borrowing, as it was very difficult to get certain kinds of loans for awhile.  What I am focusing on here however is Credit Card Loans.  Even though you could easily still get a new Credit Card from 2008-2011, and you could easily rack up those charges, Americans said no, and stopped spending on their Credit Cards.

Revolving debt in 2008 before the financial crises stood at a staggering 957.5 BILLION dollars.  That number plummeted over the next three years and currently sits at around 800 BILLION dollars.  Also, consider that credit card delinquencies (credit card payments late by 30 days or more) during that same period declined as well and currently sits at about 3 percent.  But that is all changing now.

If you have been listening to the recent economic news, things seem to be on the mend.  The jobless rate is declining, economic outlook is better, the housing crises seems to be about to hit a bottom, and generally things are looking up again.  Along with this rosier economic outlook Americans are beginning to spend more on their Credit Cards.  At the end of 2011 Credit Card charges were up slightly and have been trending that way since the end of 2011.  Also non revolving consumer debt, such as car loans and student loans, is racing upward even quicker than revolving debt is.  As a quick side note, I believe the increase in this number is due mainly to student loans which is the next financial crises around the corner.

I think this is good news.  I know there are some out there who have nothing but bad things to say about debt, but I disagree.  Like it or not America’s innovative use of debt is what made us an economic powerhouse in the past, and I believe will do the same for the future.  Debt is the fuel that gets the economy moving.  Debt jump starts our economy, because with it we can go out and get what we need, or want, right now, not a day or a year later.  This increases revenue for businesses right now, which enables them to hire more workers to meet demand, invest more in new tech and innovative ideas, and then bring new and better products and services to market.

Of course irresponsible spending and taking on of unwise or useless debt is not a good thing, but when used correctly, it is a powerful force for economic growth.  I believe it has it’s place even in the hands of the individual consumer.  So when I see people using debt again I believe it is a sign that things have improved to a point where individuals can again invest in themselves and take some risks, and that is a good thing.