The recent Consumer Confidence Index showed people are starting to take a more optimistic view when it comes to the economy and job growth. This optimism, while certainly better than constantly worrying, can also end up being a negative as some Florida consumers start to once again rack up credit card debt.
The Federal Reserve released numbers on Monday showing the largest increase in consumer debt since May 2012. Overall, there was an 8.3 percent increase from April to May of this year. The last increase of this magnitude was a 9 percent increase in May of the previous year.
When talking about consumer debt, the overall number comes from two different types of credit:
Revolving credit: This kind of debt does not have a fixed number of payments that needs to be made. Rather, how long it takes to pay something off will depend how much is paid each month. This category of credit is mainly made up of credit card debt.
Non-revolving credit: This is the kind of debt that does have a fixed number of payments. Unlike revolving credit, when payments are made, the line of credit is not extended. Student loans and car loans fall into this category.
In looking at the most recent gains in consumer debt, while non-revolving debt stayed relatively flat, according to the Federal Reserve, it was revolving debt that really increased from $849.9 billion in April to $856.5 billion in May.
This jump in revolving debt shows an increase in consumer confidence. Basically, when consumers feel more secure with their jobs, they are more likely to take on more debt. Their idea behind this is that income will be steady to allow for payments to be made on time.
Of course, an increase in consumer confidence is a positive. Yet, it is important to remember that job loss, divorce and unplanned medical bills are all common reasons for overwhelming debt. These are all still aspects of life that can creep up rather unexpectedly. When this happens to Florida residents, it is important to sit down with a bankruptcy attorney and look at the accrued debt — revolving and non-revolving — and determine what can be discharged or restructured and if this would free up money to go toward other bills.
Source: USA Today, “Consumers break out the credit cards in May,” John Waggoner, July 8, 2013
