Record Credit-Card Debt Isn’t as Bad as It Sounds

The mainstream media is trying to scare you again…

This time, the fear-mongering headlines focus on out-of-control credit-card debt.

You might’ve seen stories in recent weeks about this type of debt reaching a record level of nearly $1 trillion. That’s a staggering number.

These articles are usually full of rhetoric about how that spells trouble for the economy. And they talk about how it’s a key sign of danger for the average American consumer.

Now, it’s true that credit-card debt is at a record high. But as I’ll show you today, that isn’t as bad as the media makes it seem…

Let’s start with a chart from the Federal Reserve. It shows the total credit-card debt for U.S. consumers over the past decade. Take a look…

As you can see, credit-card debt equaled about $845 billion at the start of 2020. Today, it’s at more than $988 billion. That’s a roughly 17% gain over the past three and a half years.

But the thing is, the mainstream media fails to mention something important…

Inflation.

Since early 2020, inflation is also up around 17%. That means you would need $117 today to buy the same amount of goods that $100 bought you before the COVID-19 pandemic.

That’s not good for U.S. consumers. But it cuts both ways…

And at the end of the day, it also means a dollar of credit-card debt today isn’t as much as a dollar of credit-card debt was three years ago. We need to adjust for inflation…

Since inflation is up 17%, $845 billion in 2020 is equal to $988 billion in 2023 terms. That means in “real” terms… we’re in the same spot with credit-card debt as before the pandemic.

So when it comes to credit-card debt, it’s not as bad as the mainstream media makes it seem. Rising inflation is skewing the numbers, which is making the problem look worse.

Here’s another thing to consider…

Only 10% of Americans use cash as their primary payment method. And 76% of U.S. consumers have at least one credit card.

Folks, we simply live in an age of electronic payment methods. Most people don’t carry cash like they used to. And collectively, credit cards offer perks and protections that many debit cards and cash don’t.

The end result is simple…

More people are turning to credit cards to make everyday purchases. As long as they can manage that debt, things will be just fine.

It’s true that credit-card debt is at a record high in terms of U.S. dollars. But that fact doesn’t reflect the whole story…

Inflation means a dollar today is worth less than a dollar a few years ago. And consumers are increasingly turning to electronic payment methods over cash as well.

Much of what the mainstream media says is alarming. But it’s important to take a step back and look at the picture in a different light…

When you do that in this case, you’ll see that it isn’t as bad as it seems at first.

Good investing,

Briton Hill

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