New concerns about growing consumer debt

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Annual survey finds consumers have more credit card debt, less in retirement savings

Consumers are turning to their credit cards once again, and the National Foundation for Credit Counseling (NFCC) warns that isn't a good thing.

The organization cites the 2017 Financial Literacy Survey that found consumers generally have more credit card debt, less in retirement savings, and more concern about their long-term financial stability.

“It is concerning that so many Americans remain in such a fragile financial position after the Great Recession,“ said Susan C. Keating, president and CEO of the NFCC. “Credit card debt is on the rise, and people are not saving for a financially healthy future."

Credit card spending isn't really a problem when the balance is paid in full each month, or carried only for a month or two while it is paid off. But unfortunately, a lot of consumers don't do that.

39% carry a balance

The survey found 39% of adults carry a credit card debt from month to month, up from 36% the year before. Sometimes the balances are small, making them more manageable. But small balances have a way of growing larger. Nearly two in 10 consumers say they carry a monthly balance of $2,500 or more.

Because the Federal Reserve has now begun raising interest rates, the pressure is likely to grow. The average interest rate is already at a record high and will likely go higher as the Fed continues to boost rates for the rest of this year.

Interest rate increases related to the recent Federal Reserve announcement will likely add to the cost of carrying credit card debt, which could increase financial pressures on families who are unable to find extra room in their budget to offset the impact of these changes.

At least consumers are spending less using their credit cards. The survey found 26% of consumers said they were putting less on plastic than the year before. But consumers may be spending less because they're trying to pay down their rising balances.

Other studies

Other studies have raised similar warnings. In February, personal finance site conducted a survey of consumers and found just 52% had more money in emergency savings than in credit card debt. That's about the same level as last year.

However, 24% of consumers said their total credit card debt is greater than the amount of money they have set aside in savings, up from 22% last year.

At the same time, the monthly S&P/Experian Consumer Credit Default Indices, a report that monitors changes in consumer credit defaults, shows the overall default rate ticked up three basis points from the previous month to 0.92% in January.

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