Why $1 trillion in credit card debt is a good sign

8 months ago Comments Off on Why $1 trillion in credit card debt is a good sign

The fact that Americans are carrying nearly $1 trillion in credit card debt is a good signal for the economy, at least for now, economist Christopher Low said Friday.

Popular Searches

“It is a sign that consumers are feeling a little bit better. They’re more comfortable spending money,” he said in an interview with CNBC’s “Closing Bell.”

Outstanding credit card balances reached almost $952 billion in the first quarter, up 6 percent from a year earlier, The Wall Street Journalreported Friday. It’s the highest level since August 2009, the paper said.

Balances typically rise during expansions, Low, chief economist at FTN Financial, explained. Plus, many people are locked out of borrowing off their home.

“It’s really hard to get a home equity line of credit. People are using credit cards to pick up some of that slack.”

Unfortunately, using plastic is a more expensive way to borrow, costing consumers about 18 percent compared to less than 5 percent for mortgage debt, he said.

Right now, delinquencies are near lows but if that picks up, he said, “that’s when you should start to worry.”

Luckily, “household balance sheets … are healthier than they have been in 25 years.”

— CNBC’s Linda Sittenfeld contributed to this report.

Why $1 trillion in credit card debt is a good sign