U.S. credit card debt nearing toxic levels

Last year saw the highest consumer debt in a decade

NEW YORK — More American households are falling back into the debt hole, this time without the safety net of home values to help bail them out, the New York Post reported Sunday.

Last year, total U.S. consumer debt reached its highest point in a decade, according to a credit card industry observer.

"Now more than ever, families need to work at saving and paying off any outstanding debts," said Howard Dvorkin, a certified public accountant and founder of the credit counseling service Consolidated Credit.

After a few months of reducing credit card debt levels, Dvorkin said, Americans are starting to return to their reliance on debt.

"People made some progress in reducing card debt earlier in the year, but in the last few months, as the stock market started to rise, they started to return to their old ways of charging things," he explained.

In December 2011, the total consumer debt — which is the combination of nonrevolving and revolving debt — rose by some 9.3 percent to $2.498 trillion, according to the latest Federal Reserve Board numbers.

Both revolving debt and nonrevolving debt increased. Revolving debt, which is credit card debt, went up by 4.1 percent. Nonrevolving debt, which includes loans for cars and education, rose 11.8 percent, the central bank's report said.

The trend — month to month, quarter to quarter and year to year — is rising steeply.

"Consumer credit increased at an annual rate of 7.5 percent in the fourth quarter. Revolving credit increased at an annual rate of 4.5 percent, and nonrevolving credit increased 9 percent in December," the Fed wrote in a note along with the latest monthly report, which also reviewed 2011.

These numbers, Dvorkin warns, mean that many middle-class Americans are taking big risks.

In a weak economy with high unemployment, Dvorkin noted, many people with big card balances become vulnerable to financial catastrophe.

Lewis J. Altfest, a Manhattan adviser who targets professional, high-income clients, devotes part of his practice to telling the well-heeled how to cut back on credit card debt.

"It's still a big problem. Some people want to live life to the fullest even though they are using their cards too much," Altfest explained. He said many clients last year tried to reduce card debt. But some "are falling back into their old ways."

Indeed, last holiday season many consumers financed Black Friday trips to the mall and Cyber Monday online buying sprees by making purchases with plastic, Dvorkin contends.

"As the bills begin to roll in, consumers may find themselves unable to pay them off. It's good to see an increase in consumer spending, but never is it worth going into debt," according to Dvorkin.


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