The national debt is a massive $34.2 trillion, and the U.S. Treasury Fiscal Data updates it daily.
And, according to a new WalletHub report, Americans are spending like they never have before — and are showing little signs of slowing down.
The United States as a whole has “over $1.1 trillion in credit card debt, over $1.6 trillion in auto loan debt and a few hundred billion dollars in personal-loan debt,” per WalletHub. “Our collective auto loan debt went from around $1.1 trillion to over $1.6 trillion just since 2012, a 50% increase in a decade.”
People in some states are swiping their credit cards and going into more consumer debt than people in others.
States with the highest increase in consumer debt:
- Delaware.
- Alaska.
- Florida.
- Maine.
- South Dakota.
States with the lowest increase in consumer debt:
- Rhode Island.
- Kentucky.
- Mississippi.
- Ohio.
- Oklahoma.
Utah was ranked 41st.
Why are Americans spending money they don’t have?
The U.S. has a strong credit culture, where credit cards, loans and other forms of borrowing are easily accessible and widely accepted. This kind of accessibility can be enticing for people to fall into the pattern of swipe now, pay later.
“This is a chronic issue overall where we as a society have gotten more used to using credit for everything,” Michael Reynolds, owner of Elevation Financial, told CBS News. “Credit card companies are incredibly good marketers, and credit cards have become the norm and a way of life for everyone.”
Reynolds added that he believes consumers see credit cards as not spending real money and that stimulus checks during the pandemic gave people more spending money they weren’t used to having, causing them to fall into a pattern of overspending:
“That detachment makes people feel less pain or stress when they use credit. It doesn’t feel like they’re spending real money. … I think a lot of people got used to spending cash they didn’t otherwise have. They got into patterns that involved a higher level of spending that they’re now using debt for.”
How high debt affects the economy
High levels of debt can have profound effects on the economy, influencing everything from individual financial stability to national economic growth and stability. A country burdened by debt will have fewer resources to create a prosperous future.
“Rising debt reduces business investment and slows economic growth,” per the Peter G. Peterson Foundation. “It also increases expectations of higher rates of inflation and erosion of confidence in the U.S. dollar.”
The issue of the national debt is a very politicized topic, especially with the total debt approaching the debt limit set by Congress.
“The debt ceiling — also known as the debt limit — is the maximum amount of money that the United States can borrow cumulatively to meet its existing legal obligations,” according to Investopedia. “The debt ceiling has been raised or suspended numerous times over the years to avoid the worst-case scenario: a default by the U.S. government on its debt.”
High debt levels make consumers more vulnerable to economic downturns, job losses or increases in interest rates.
Tips to manage debt
Experts say managing personal debt effectively is crucial for financial stability and peace of mind, as debt can be very stressful in a person’s life. By taking control of your finances and making informed decisions, you can work toward becoming debt-free and achieving financial stability.
“At a time when interest rates are very high, it’s especially important to minimize the accumulation of debt,” WalletHub Editor John Kiernan said. “Americans have added a staggering amount of new debt in the past decade, and it can be very easy for that debt to become unsustainable, leading to future issues like default and major credit score damage.”
WalletHub gave the following advice for managing debt:
- Create a debt list and establish a payment plan.
- Get rid of unrequired expenses.
- Talk with your creditor about getting lower interest rates.
- Find ways to bring in extra income.
Refinance the debt you have.
