GREENFIELD, Mass (WWLP) - A new study by CardHub.com shows that U.S. consumers gained more than $17 billion in new credit card debt during the second quarter of the year, erasing more than fifty percent of what was paid down in the first quarter.
The average household now owes $6,658 to credit card lenders, up $68 from the first quarter ($6,590).
Cardhub.com says credit card debt always tends to go up in the second quarter of the year, because fewer people receive salary bonuses and tax refunds like in the first three months of the year.
Paying with plastic has become the norm, and cash the exception.
Hansen Donius, of Ashfield says he uses his credit card rarely, but even using a debit card is easier than using cash.
"Coins? who wants to carry coins around. You know you waste I don't know how much money you actually waste but I lose so many of them."
Matt Donaldson of Turners Falls says using a credit card is a matter of convenience. "I have to replace it twice a year it wears out so fast. Much easier than cash these days, much easier.”
CardHub says credit card spending in the last couple of years has been heading in the wrong direction.
The debt taken on in the second quarter of this year is 75% higher than what was added to tabs in quarter two of 2010 and 80% higher than in 2009.
This year is looking more like 2011 and 2012, according to CardHub, where consumers are projected to end the year with $41.2 billion dollars in new credit card debt.
The $17 billion in credit card debt added to quarter two for this year, build-up was 3% smaller than that in quarter two of 2012 and 12% smaller than in quarter two of 2011. Yet when looking back at the second quarters of 2009 and 2010 it’s still significant. So debt is still heading in the wrong direction at a slower pace, CardHub said.
"Pay it and forget it, just a swipe of the card, you forget about it until its time to pay the bill. Take the hit once instead of everyday,” Donaldson said.
But there are people that don't have a credit card, and don't plan on getting one.
Ryan Pernice, of Deerfield told 22News, "It causes a lot of anxiety, and I guess that's just some anxiety I don't want to deal with."
U.S. consumers have also charged-off on more than a quarter of a trillion dollars since the beginning of 2009, CardHub states.
A charge-off means that someone has become extremely late on a payment to the credit lender, and they will write it off as a loss but it negatively affects the credit report. “It stays on your credit report for 7 years. Lenders also generally sell charged-off debt to collection agencies who will attempt to recoup the debt through various means including lawsuit until its statute of limitations runs out, a time period that varies by state,” according to the CardHub website.
The charge-off rate is now at 3.86% is at its lowest point since 2006, according to CardHub.
CardHub CEO Odyssas Papadimitriou said in a press release, “More and more consumers have the funds needed to stay beyond their means. Such practices clearly aren’t sustainable. At some point, minimum pressure on the financial sector as well as the economy in general in the process. If we want to avoid creating a double-dip credit crunch and instead foster true economic recovery, we will need to prioritize sensibility over luxuries.”
CardHub also gave five tips to manage debt.
1. Make a budget and stick to it.
2. Build an emergency fund.
3. Island approach- using different cards for different transactions.
4. Apply the majority of your monthly debt payments to the balance with highest interest rates.
5. Budget and plan according to your job situation.
To find out more about CardHub’s Credit Card Study and tips visit their website here.