Credit card debt by Americans eclipses the record set before 2008 financial meltdown
Fed says card loans hit US$1.2 trillion in June
US consumer credit-card debt just passed an ominous milestone, beating a record set just before the global financial system almost collapsed in 2008.
Outstanding card loans reached US$1.02 trillion in June, data from the Federal Reserve show, as lenders including Citigroup and JPMorgan Chase compete to sign up cardholders who may carry balances, a relatively lucrative business in a prolonged period of low interest rates.
The bet is that this time it won’t end so badly. In 2008, a drop in home prices spiralled into a global financial meltdown, and after the jobless rate surged toward 10 per cent, banks wrote off more than US$100 billion in credit-card loans over the next two years.
Investors have been skittish over the potential for defaults to rise ever since card balances eclipsed US$1 trillion in February. Credit-card issuers Capital One Financial, Synchrony Financial and Discover Financial Services said write-off rates ticked up in the second quarter from the previous three months.