Photo (cc) by StockMonkeys.com
Many Americans are putting themselves in a precarious financial situation, racking up credit card debt instead of saving money.
A recent survey by Bankrate.com found that nearly 30 percent of Americans have more credit card debt than they have in savings.
Just 51 percent of people said they have enough emergency savings to pay off their credit card debt, which is the lowest level since 2011, when Bankrate began the survey, said the Los Angeles Times. And 17 percent of those polled said they have neither credit card debt nor a rainy-day account.
The survey also found that the people who are most likely to need a rainy-day fund to cover an unexpected financial setback, like a job loss or broken-down car, are unfortunately the least likely to have emergency savings that outweigh their debt.
The LA Times said: “’This is a reflection of the stagnant incomes, long-term unemployment and high household expenses that are hampering the financial progress of many Americans,’ according to Greg McBride, Bankrate.com’s chief financial analyst.”
According to Time, consumer debt is the highest it’s been since 2011.
And more unsettling, debt is rising at rapid levels. Americans’ debt — that includes mortgages, auto loans, student loans and credit card debt — increased by 2.1 percent, or $241 billion in the last three months of 2013, the greatest margin of increase since the third quarter of 2007, shortly before the U.S. spiraled into recession.
The increase in consumer debt seems to coincide with an increase in confidence in the economy. “And debt helps drive economic growth as consumers spend more money on the assurance they’ll make it back later,” Time said.
But that confidence in a raise or job bonus could be risky, Carl Richards, a financial planner at BAM Advisor Services, told Time:
“We’ve already forgotten 2008 and 2009, and now we’re projecting into the indefinite future and we’re spending based on as if it had already happened,” says Richards. “Our default setting is optimistic, and maybe overly optimistic.”
Are you comfortable with your credit card debt and emergency savings? Share your comments below or on our Facebook page.