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Decrease in U.S. credit card debt is deceiving

The three most common forms of debt are mortgages, student loans, and credit card debt, in that order. In the past, it's been fairly easy for people in Alabama and other states across the U.S. to obtain mortgages even if it was unlikely that they would be able to make payments. Just about anyone could get a credit card, and it was even easier to obtain a student loan. The result of these frivolous, and sometimes deceptive lending practices, has been loads of debt.

Despite the difficult economy and the weak job market, credit card debt is actually decreasing. Credit card debt went from an average household balance of $15,000 in 2006 to $18,000. It has since dropped to around $14,500 in 2010 where it has stayed. Despite the drop, the news isn't as good as it sounds.

The drop in credit card debt is attributed more than anything to the fact that many banks have given up on trying to collect bad debt. Despite this drop, households are more indebted than in 2010. Mortgage debt is at around $13.5 trillion and student loan debt is at close to $1 trillion.

Although many people are quick to point fingers at consumers who are spending frivolously, the majority of Americans carrying credit card debt are using cards to pay for everyday expenses including groceries and bills. Many believe that the blame lies in the credit card companies and mortgage agencies willingness to loan money to individuals who won't likely be able to pay it back. Until the requirements around lending change, the debt cycle will likely stay the same.

Source: The Christian Science Monitor, "Credit card debt is down, but don't cheer," Stephen Vanderpool, June 9, 2012

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