U.S. credit card debt has reached an all-time high in what experts say could be an early warning sign.

The new year started off with some worrying news for economists and consumers. According to USA Today, the Federal Reserve recently released data showing that U.S. credit card debt had reached its highest levels on record – and had exceeded the previous peak seen in April of 2008 just before the financial crisis struck. While incomes are also higher now than they were in 2008, rising default rates and evidence of growing financial insecurity for many Americans, suggests that the rising debt load could be an early warning signal for consumers and the economy.

Credit card top tops $1 trillion

Federal Reserve data shows that revolving debt – which is mostly credit card debt – increased by $11.2 billion to reach $1.023 trillion in November 2017. Given that those figures don’t include all of the holiday shopping purchases consumers were charging to their cards in December, it is likely that credit card debt is even higher than that figure now. That figure is already an all-time record, however, and slightly higher than the previous record of $1.021 trillion recorded in April 2008.

Credit card debt wasn’t the only debt type to surge in recent months. The Fed report also shows that non-revolving debt, which includes student and car loans, increased by $16.8 billion to $2.8 trillion.

The delinquency rates for credit cards also increased from 7 percent to 7.5 percent over the past year.

An early warning sign?

It’s important to stress that not everything in the Fed report was bad news. The ratio of credit card debt to gross domestic product is still just five percent compared to 6.5 percent in 2008. Also, that 7.5 percent delinquency rate is much lower than the 15 percent delinquency rate witnessed during the financial crisis.

However, there are reasons to be concerned. As CNBC reports, a recent study found that only 39 percent of Americans have enough savings to cover a sudden $1,000 expense, such as a medical bill or car repair. Another study found that 69 percent of Americans have less than $1,000 in savings. Furthermore, with the Fed expected to continue increasing interest rates this year, paying off those credit cards is going to become even harder. As a result, many consumers find themselves in a precarious situation whereby a sudden expected change in their circumstances could spell major financial trouble.

Considering bankruptcy

For those who are struggling with keeping up with credit card payments and other debts, it may be time to consider bankruptcy. Of course, bankruptcy is not the best option for everybody, but in many cases it can offer the relief, both from debt and from creditors, that people need to finally get back on their feet. A bankruptcy attorney can help clients understand what their options may be and inform them about whether bankruptcy could potentially help them improve their long-term financial situation.


-On behalf of David Nickless