Tis The Season For Credit Card Debt: This Christmas Americans Will Spend An Average Of 422 Dollars Per Child - Michael Snyder THE ECONOMIC COLLAPSE BLOG

Tis The Season For Credit Card Debt: This Christmas Americans Will Spend An Average Of 422 Dollars Per Child Posted: 19 Dec 2016   Michael Snyder  THE ECONOMIC COLLAPSE BLOG For many Americans, the quality of Christmas is determined by the quality of the presents.  This is especially true for our children, and some of them literally spend months anticipating their haul on Christmas morning.  I know that when I was growing up Christmas was all about the presents.  Yes, adults would give lip service to the other elements of Christmas, but all of the other holiday activities could have faded away and it still would have been Christmas as long as presents were under that tree on the morning of December 25th.  Perhaps things are different in your family, but it is undeniable that for our society as a whole gifts are the central feature of the holiday season. And that is why so many parents feel such immense pressure to spend a tremendous amount of money on gifts for their children each year.  Of course this pressure that they feel is constantly being reinforced by television ads and big Hollywood movies that continuously hammer home what a “good Christmas” should look like. Once again in 2016, parents will spend far more money than they should because they want to make their children happy.  According to a brand new survey from T. Rowe Price, parents in the United States will spend an average of 422 dollars per child this holiday season… More than half of parents report they aim to get everything on their kids’ wish lists this year, spending an average of $422 per child, according to a new survey from T. Rowe Price. To me, that seems like a ridiculous amount of money to spend on a single child, but this is apparently what people are doing. But can most families really afford to be spending so wildly? Of course not.  As I have detailed previously, 69 percent of all Americans have less than $1,000 in savings.  That means that about two-thirds of the country is essentially living paycheck to paycheck. So all of this reckless spending brings with it a lot of additional financial pressure.  But because we are a “buy now, pay later” society, we do it anyway.  We are willing to mortgage a little bit of the future in order to have a nice Christmas now. Another new survey has found that close to half the country feels “pressure to spend more than they can afford during the holiday season”… The SunTrust Banks, Inc. (NYSE: STI) annual Holiday Financial Confidence survey reveals that 43 percent of Americans feel pressure to spend more than they can afford during the holiday season. Pressure to overspend is up four percent since the survey was first conducted in 2014 by Harris Poll, but down slightly from a high of 46 percent last year. Ultimately, much of this spending ends up going on credit cards, and credit card debt is one of the most insidious forms of debt. And the truth is that credit card debt was already surging nationally even before we got to the holiday season… But at least one indicator suggests that much of the US is actually struggling financially: Americans are piling on credit card debt at record levels that we haven’t seen since the financial crisis. Households added $21.9 billion in credit card debt in the third quarter — the largest increase for that period since 2007 — bringing the amount of outstanding credit card debt to $927.1 billion, according to the latest study from WalletHub. Debt takes future consumption and brings it into the present, but there is a price to be paid for doing that. Because we have to pay interest on that debt, we always have to pay back more money than we originally borrowed.  And because interest rates on credit cards are so high, paying back credit card debt can be particularly painful. According to Business Insider, the average American household currently owes nearly $8,000 to the credit card companies, and it is being suggested that this is a sign that the economy is much weaker than we have been led to believe… The fact that the average household with debt now owes $7,941 to credit card companies, according to WalletHub, suggests that America’s putative economic strength might be a mirage — that the economy may in fact be a lot weaker than all the happy indicators are leading people to believe. “I think it is a cause of concern because it says consumers are struggling despite the low unemployment figures,” says Lucia Dunn, an economics professor at Ohio State University. “I think the rise in debt arises from weakness in the economy. People whose incomes have dropped may be trying to maintain an older level of consumption by just charging everything.” And guess what? The Federal Reserve just raised interest rates, and so that means that paying off credit card debt will be even more painful for Americans in 2017 than it was in 2016. Could it be possible that we have lost our way? Could it be possible that we need to entirely rethink our approach to “the holiday season”? According to an old NBC News story, one survey discovered that 45 percent of all Americans would prefer to skip Christmas altogether because of all the financial pressure… Some 45 percent of those polled said the holiday season brings so much financial pressure, they would prefer to skip it altogether. Almost half said their level of stress related to holiday expenses is high or extremely high. That’s probably because nearly the same amount — some 45 percent — say they do not expect to have enough money set aside to cover holiday expenses. As a society, we need to learn that things will never make us happy. Life is not about accumulating toys.  Rather, we were created to love and to be loved. If you want to live a great life, learn how to be a person of great love.  Unfortunately, most people never seem to learn that lesson. A couple of months ago, I reported that the total amount of household debt in the United States had reached a grand total of 12.3 trillion dollars. If you break that number down, it comes to approximately $38,557 for every man, woman and child in the entire country. In addition to that, we must also remember that corporate debt has approximately doubled while Barack Obama has been in the White House, state and local government debt is completely out of control, and the U.S. national debt is now sitting just under 20 trillion dollars. Our greed is absolutely killing us, but we can’t stop. So we will continue to party until eventually somebody comes along and turns out the lights.

Credit Card Debt In The United States Is Approaching A Trillion Dollars - Michael Snyder THE ECONOMIC COLLAPSE BLOG

Credit Card Debt In The United States Is Approaching A Trillion Dollars

Mar 2016   Michael Snyder  THE ECONOMIC COLLAPSE BLOG

For the first time ever, total credit card debt in the United States is approaching a trillion dollars.  Instead of learning painful lessons from the last recession, Americans continue to make the same horrendous financial mistakes over and over again.  In fact, U.S. consumers accumulated more new credit card debt during the 4th quarter of 2015 than they did during the years of 2009, 2010 and 2011 combined.

That is absolutely insanity, because other than payday loans, credit card debt is just about the worst kind of debt that consumers could possibly go into.  Extremely high rates of interest, combined with severe penalties and fees, can choke the financial life out of almost any family in no time at all.

These days, most Americans use credit cards for various purposes, and they can be very convenient.

And if you pay them off every single month, they don’t become a problem.

Unfortunately, a lot of people are not doing this.  According to CNBC, total U.S. credit card debt rose by an astounding 71 billion dollars last year alone…

Last year, credit card debt in the U.S. surged by approximately $71 billion to $917.7 billion, according to a new study from CardHub.com. The research also found that most of the debt accrued in 2015 came in the fourth quarter, when Americans tacked on more than $52 billion.
“With 7 of the past 10 quarters reflecting year-over-year regression in consumer performance, evidence is mounting to support the notion that credit card users are reverting to pre-downturn bad habits,” CardHub CEO Odysseas Papadimitriou said in a statement.

And as noted above, things were particularly gruesome during the 4th quarter of last year.
According to Alternet, Americans added more credit card debt during those three months than during the entire years of 2009, 2010 and 2011 combined…

Not since we headed into the Great Recession of 2008 have we been quite so loosey-goosey with our credit cards, racking up debt with stunning speed. Of our 4Q totals, CardHub notes, “during this one quarter, we added more debt than in 2009, 2010 and 2011 put together.” That brings dollars owed to credit card companies by each debt-saddled American family up to $7,879, the highest since the Great Recession.

I can’t even begin to describe how unwise this is.  When I was in my twenties, I made the same mistakes that so many other Americans are making right now.  I very foolishly racked up large balances on my credit cards, and it took years of extremely painful payments to fix those mistakes.

In America today, 37 percent of all households maintain credit card balances from month to month, and the average level of credit card debt for those households is $15,700.  The following comes from CBS Minnesota…

According to NerdWallet, 37 percent of American households have credit card debt, which is defined as not paying off the full balance every month. Using data from the Federal Reserve of New York, U.S. Census and its own poll, NerdWallet found the average balance for those in credit debt is $15,700.

What most people don’t realize is that by letting balances run from month to month, you can end up paying just about as much in interest as you did for the original purchases.

Here is one credit card repayment scenario that comes from NerdWallet…

For the sake of simplicity in calculating the cost of the average credit card debt, let’s assume an APR of 16% and a fixed payment. We’ll also assume a minimum payment of 2% of the principal balance of $15,762, the average as of the end of 2015, or $315.
Based on those terms — and assuming you don’t add any more to your credit card balance — it would take 84 months, or seven years, to pay off the balance in full. During that time, you’ll pay $10,402 in interest — about two-thirds of the original balance — for a total of $26,164. This averages out to about $124 in interest per month.

The scenario above assumes that all payments are made on time.  But a single late payment can trigger higher interest rates, penalties and fees that can be absolutely suffocating. In fact, some people end up paying back three, four or five times as much as they originally borrowed to the credit card companies.

If you use credit cards for convenience or to buy things online or to automatically pay bills, that is fine.  Just don’t let balances accumulate.  As you can see, that can be financial suicide.
And as we head into a new global recession, you definitely don’t want to be saddled with high levels of debt.  All of us have little luxuries that we can cut back on, and now is not the time to be living on the financial edge.

Just look at some of the troubling signs that we have seen in the news in recent days…

-The U.S. oil and rig count just dropped to the lowest level ever recorded

-One Houston CEO told employees that he was laying off that we have entered a “depression”

-It is being reported that 35 percent of all oil and gas companies around the world are at risk of falling into bankruptcy

-Unemployment in Canada just hit a three year high

-The number of job cuts in the United States skyrocketed 218 percent during the month of January according to Challenger, Gray & Christmas

-U.S. manufacturing activity has been in contraction for four months in a row

-U.S. factory orders have now fallen for 15 months in a row

-Subprime auto loan delinquencies have hit their highest level since the last recession

-Orders for Class 8 trucks in the United States dropped by 48 percent on a year over year basis in January

-The Restaurant Performance Index in the United States has dropped to the lowest level that we have seen since 2008

-Major retailers all over America are shutting down hundreds of stores

And this list does not even include all of the signs of severe economic trouble from around the rest of the planet that I have been writing about lately.

Credit card debt truly is financial poison, and it is not something that you want to have during the hard times that are coming.

Unfortunately, most Americans never learn, and they continue to rack up credit card debt as if there is no tomorrow even as the global economy starts to spiral downhill all around them.