Forget about your tax refund: it's already spoken for.
Back in Feburary, the Federal Reserve Bank of New York announced that total household debt increased by $226 billion (or 1.8%) to $12.58 trillion during the fourth quarter of 2016. That's the largest quarterly increase in total household debt since the fourth quarter of 2013 and $460 billion in debt more than U.S. consumers had amassed a year earlier. It also put debt just 0.8% below its peak of $12.68 trillion in the third quarter of 2008.
Almost every form of debt increased from the same time in 2015. Mortgage debt is up $231 billion to $8.48 trillion. Student loan debt increased $78 billion to $1.31 trillion. Auto loan debt is up $93 billion to $1.16 trillion. Credit card debt climbed by $46 billion to $779 billion. Even all of those figure may be low.
"Debt held by Americans is approaching its previous peak, yet its composition today is vastly different as the growth in balances has been driven by non-housing debt," says Wilbert van der Klaauw, senior vice president at the New York Fed. "Since reaching a trough in mid-2013, the rebound in household debt has been led by student debt and auto debt, with only sluggish growth in mortgage debt."
According to the Federal Reserve in Washington, D.C., revolving debt of all kinds exceeded $1 billion in the fourth quarter of 2016 for the first time since 2008 and returned to that mark again in February. That said, credit card delinquency rates were around 10% the last time revolving debt hit the $1 billion mark in 2008. At the end of last year, only 7% of credit card debt was past due.
"Credit card debt is rising quickly, but delinquencies are still really low," says Matt Schulz, CreditCards.com's senior industry analyst. "Many Americans are doing a good job of controlling their debts, but eventually with big debts and rising interest rates, it's likely that something will have to give. I expect delinquencies to start rising more quickly in 2017."
Consumer spending and saving habits are doing little to prove him wrong. A survey by TD bank found that 21% of consumers would advise their younger selves to use their tax return to fund a savings account. However, only 12.5% currently plan to do so. Why aren't they saving more? Because 25% are using their tax return to pay down debt, while 23% are using it to pay bills.