There has been a massive jump in credit card debt over the last three years. In 2021, this debt was right around $750 billion, when looking at the total debt for all Americans. But it skyrocketed and broke the $1 trillion mark in the final quarter of 2023. This was a record-breaking number that means Americans now owe more on their credit cards than they ever have in the past.
What exactly does this mean for the economy? One economic advisor noted that it was a signifier of increasing financial stress. He noted that low-income households were especially going to be impacted, perhaps forcing people to use credit cards to make necessary purchases. He also pointed out that these debt issues will have a major impact on younger Americans, who may have lower earning levels.
Will it lead to bankruptcy?
It certainly can lead to bankruptcy. Credit card debt is often cited as one of the reasons why people file. It is usually not the only reason – consumers will also cite issues like medical bills or job loss – but it certainly does play a role.
That said, the credit card issue is much more nuanced than that. For instance, those who have already declared bankruptcy often use credit cards to repair their credit score and build it back up again. In this sense, it’s not credit cards themselves that lead to bankruptcy. Other issues – stagnant wages, corporations drastically raising prices, inflation, etc – may push people to use credit cards in ways that they ordinarily would not.
It is that type of use that can lead to bankruptcy, and it’s important for all consumers to know exactly what legal options they have.
