Call it the May mystery.
Credit card debt jumped by the biggest month-over-month percentage since November 2007 (the month before the official start of the Great Recession, if you're keeping count). Revolving balances increased by $8 billion in May to $870.2 billion from the month before, according to the Federal Reserve's latest stats released Monday.
That begs the question: What in the heck happened in May that made more Americans charge purchases?
Typically, economists say an uptick in credit card debt is good news because it means U.S. consumers feel more confident about borrowing money and paying it back, all around a positive sign for the economy. But this time, the jump is too big for that reasoning.
A sampling of economist statements from media reports covering these Fed stats reveals that they think it's because consumers are struggling financially. They have some valid points. Piece of evidence No. 1: Consumer confidence slid, according to an oft-cited index from the Conference Board.
Piece of evidence No. 2: lifeless job growth. The economy added on average 75,000 jobs per month from April through June, hardly a number to write Mom about.
Piece of evidence No. 3: GDP. Gross domestic product, that measure of an economy's engine strength, was lackluster in the first quarter and smarter prognosticators than me are guessing it slowed even more during the spring.
Let me add another piece of evidence to the pot. More than 400,000 long-term out-of-work Americans lost unemployment benefits by May 12 due to cuts in federal assistance, according to the National Employment Law Project, or NELP. The nonprofit advocacy for workers broke it down this way: 32,300 Americans lost jobless benefits in January and February; another 131,600 lost them in April; and 246,900 kissed them goodbye in May. More are on the way this year, NELP says.
So, it's probably a safe bet some of those people who lost jobless benefits turned to credit cards to fill in the gaps. That's certainly a bad sign.
Of course, there are other explanations for the boost in credit card debt. Maybe more people booked their summer vacations on their credit cards, or more college grads are spending on furnishing their new place. Whatever the case, keep the charging smart. Spend only what you can afford to pay off every month, or else your credit card will be the undoing of your financial security.
Did you charge more in May? If so, why?
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