Americans are spending more. That's the good news. The bad news: They're using their credit cards to do so.
A new survey supports the idea that increased consumer spending is fueling economic growth, but the data also show a large percentage of that spending is taking place using credit cards.
CardHub found Americans increased their credit card debt by $15 billion between the third quarter of 2013 and the third quarter of 2014, a 35% increase.
In a blog post on the company’s website, CardHub CEO Odysseas Papdimitriou said the debt picture is on a negative trend, and “represents the largest third-quarter build-up in the past 5 years, with the exception of 2011.
“The consumer debt picture has now worsened on a year-over-year basis for 4 straight quarters.”
The bright spot in the report is that the credit card charge-off rate is just 2.89%. Charge-offs occur when the lender moves a loan off its books and counts it as a loss.
The fact that the rate is so low—the lowest since 1985, according to CardHub—suggests most consumers “have the financial wherewithal to remain current on their obligations.”
CardHub offers a handful of tips for people managing debt. They range from the basics: Make a budget and emergency fund, to more strategic options, like the “Island Approach.”
According to Papadimitriou, the Island Approach calls for using different cards for different types of transactions. For instance, a consumer could transfer their existing debt to a 0% interest rate credit card, thus reducing the cost of paying off that debt. Meanwhile, they could get a travel rewards card and use that card for gas and other travel expenses, earning rewards that would reduce future travel expenses.
The full report, including historical data, can be found over at CardHub.