U.S. credit card holders are paying their bills at the best rate in three decades. According to the quarterly credit card debt study from CardHub, the credit card charge-off rate is now at 2.89 percent — the lowest point since 1985.
At the same time, while economic gains are making consumer spending habits sustainable — for now, at least — that spending is still racking up credit-card debt. U.S. consumers racked up $15.9 billion in net new credit-card debt in Q3 2014, and CardHub projects they’ll hit a total of more than $60 billion in new debt by the end of 2014, up at least 55 percent from the end of 2013.
That $15.9 billion represents the largest Q3 build-up in the past five years except for 2011, when consumers were running up debt at the (previously) highest rate since the start of the recession.
And while the charge-off rate is at a historic low, $6 billion of that $15.9 billion represents the charge-off rate for the quarter — debt that will never be repaid.
Meanwhile, the average household’s credit-card balance rose by 1 percent or $68 during Q3 to $6,870, a number that CardHub projects will hit $7,126 by the end of 2014. That’s just $1,200 short of a tipping point in CardHub’s model. Beyond that debt load, minimum payments will become unsustainable and delinquencies will skyrocket, CardHub CEO Odysseas Papadimitriou wrote.