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American's Debt Falling, But The Number Is Still Out Of This World

I wrote a couple weeks ago about how Americans were starting to pay their credit card bills on time. Although this is a great sign, it's also good to remind ourselves that the amount of debt we're in to begin with...is a lot.
To get right to the point, the International Business Times had a story reporting that while the debt is declining steadily, Americans currently owe $856.5 billion. That's a lot of money. Not quite as much as the one trillion they owed in 2008, but it's still a pretty penny. I guess it's a good sign when you get your debt under the GDP of Mexico, but I think we have a little further to go.
Like we talked about last week, people are becoming a little more credit cautious, deciding what and what not to use credit for. They are also starting to pay bills on time which is helping reduce the debt.
While everyone is paying the credit card companies, it might be a good idea for people to start paying themselves as well.

Michael Chadwick, CFP, and CEO of Chadwick Financial Advisors in Unionville, Conn., told IB Times that American households are in better financial shape now than they were in 2008, during the depths of the financial crisis, but they have a long way to go before they are healthy. "People are not saving enough in America," he said. "For example, Germans save 16 percent of their income, [while] we save very little on average." But Chadwick concedes that the consumer credit card debt "bubble" does not pose as great a threat to the larger economy as it once did. "Banks are far more solid in their balance sheets than they were in 2008, so they can handle a big impact here," he noted.

That credit card debt bubble they are referring to might pop if a whole bunch of Americans were to suddenly all default on their credit card debt at once. While that's not likely to happen in the private sector, federal student loans offer forgiveness after so many years, which is why the government is keeping a closer eye on those since they are the ones handing out the dollars.

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Alice Bryant's picture

Alice Bryant is the Editor of Creditnet and a personal finance expert with over a decade of experience writing about credit cards, credit scores, debt repair, and more.

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