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Balances on credit cards increasing slowly

While the aggregate balance that residents of Massachusetts and people across the United States are carrying on their credit cards is increasing from a decade low, it is doing so over so slightly.

In 2008, before the Great Recession, Americans carried approximately $866 billion in credit card debt. Presently, the number is closer to $672 billion. Furthermore, while the number of Americans holding credit card accounts has also rebounded, that number is comparable to the number of accountholders in 1999 and 2000.

Experts say that the public should not conclude from this information that people have in principle decided not to incur credit card debt anymore and instead rely on other means to buy the things they want and need. For one, it is now more difficult for people of limited means to get credit, as lenders are more reluctant now to extend it to those who pose a questionable financial risk. More importantly, households are still experiencing a slower stream of income, and they therefore continue to restrain their spending for what are probably practical reasons.

Financial experts describe this process as "deleveraging," which in plain English means that consumers in Massachusetts and elsewhere are taking steps to reduce household debt in order to increase available income and equity. A bankruptcy is, ultimately, a type of "deleveraging," a relatively immediate step a family in financial straits can take to dump debt.

From the standpoint of individuals trying to make ends meet, hopefully they will be able simply to hold credit card debt at bay even in the face of a lower income or unexpected and necessary expenses. For those who for whatever reason cannot do so, they may wish to consider a bankruptcy as a viable option.

Source: Investors.com, "Credit card debt recovery sluggish with incomes weak," Jason Ma, Nov. 6, 2012

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