American Families Struggling Under Crushing Credit Card Debt

The federal debt may be increasing, but revolving debt, largely fueled by credit card debt, has been slowly inching downward over the past year as credit-weary consumers continue to tighten their belts to survive in the still sluggish post-recession economy. The Federal Reserve reports that in the first quarter of 2009, U.S. credit card debt fell to $945.9 billion, a $5.4 billion drop over the previous quarter, prompting some analysts to say that American consumers are weaning themselves off easy credit and learning to live within their means.

Credit repair experts say it’s too soon to tell whether the decrease in credit card use means that consumers have permanently holstered their credit cards or are merely letting them cool off. Addiction experts who study American shopping habits aren’t convinced that consumers have changed their spend-thrift ways. With an average 13 credit cards per household, the majority of consumers still carry nearly crippling amounts of credit card debt.

According to Forbes.com, the average U.S. household income in Miami is $50,233, an average $9,797.38 of which is credit card debt. To pay off that debt families would have to devote 22.61%, or nearly one-fifth, of their income to debt repayment, a sacrifice most American consumers aren’t prepared to make. While consumer debt loads were found to vary somewhat by region, the experience of Miami consumers is fairly similar to that of debt-burdened families across the U.S. The bottom line, say credit repair professionals, is that Americans will continue to struggle with burdensome debt for the foreseeable future.

Interestingly, the tight credit market may help consumers decrease their credit card debt. Not only are more stringent lending practices making it more difficult for consumers to obtain new credit cards, banks and other credit card issuers have decreased average credit card limits on existing cards  from $4,897 in 2008 to $3,972 today. The resultant decrease in available credit is forcing U.S. consumers to limit spending and adopt a more realistic approach to their finances.

Most financial experts think this is a good thing, but realize that decreased credit card use is likely to be temporary. As soon as banks loosen their purse strings again, credit card use is expected to rise and consumer credit card debt to begin inching back up again.