Consumers Taking on Debt at a Frightening Rate

The boom in the boom and bust cycle may once again be starting. However, it is once again being fueled by borrowing.

When it comes to their personal finances, American consumers are notorious for taking on high amounts of debt. While consumer spending is one of the main drivers of the United States economy, the high risk associated with too much debt is one of the factors that caused the Great Recession. Therefore, after five years of recession you would think consumers have learned not to do all their spending on credit—apparently not. According to a recent study by the Federal Reserve Bank of New York, after the latest holiday spending spree, debt levels have risen at the fastest rates seen since 2007.

Data released Tuesday by the Federal Reserve Bank of New York shows that in the fourth quarter of 2013 overall credit debt increased by $11 billion to $683 billion. At $11.52 trillion, overall consumer debt is at its highest levels since 2011 and even more disturbing, that debt is rising at rapid levels. In the last three months of 2013, debt that includes credit card debt, auto loans, mortgages and student loans increased by $241 billion or 2.1%. This is the greatest rate of increase since the third quarter of 2007, shortly before the bubble burst last time. So, does anyone learn anything from these boom and bust cycles? Maybe politicians who have learned to ride the wave into office but consumers who create the turbulence through excessive borrowing appear to have very short-term memories.

Financial monitor says that on an individual level, Americans are in a very precarious financial position. According to a survey Bankrate also released Tuesday, 28% of Americans have less in savings funds than they have in credit card debt. More than one quarter of Americans would not be able to pay off their debt with savings, even if they wanted to. Only 51% of Americans today have an emergency fund that is larger than their credit card debt. This is also the lowest percentage since started tracking the ratio in 2011. “This is not moving in the right direction,” says chief financial analyst at, Greg McBride, “American consumers are not showing improvement in these areas.”


Judith A. Swift ( is a board certified specialist in both consumer and business bankruptcy in Dallas, TX. She is also admitted to practice in federal Tax Court. Bankruptcy can be a valuable tool in eliminating, reducing and restructuring some taxes.

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