The Looming Crisis: How America’s Consumer Spending Habits are Pushing Credit Limits to the Brink

The American economy has long been built on the backbone of consumer spending, with individuals and households driving growth through their purchases of goods and services. However, recent trends suggest that there may be potential troubles ahead as Americans continue to exhaust their credit limits and take on more debt than ever before.

One key metric to track in this regard is the level of consumer credit outstanding, which measures the total amount of debt held by households for items such as credit cards, auto loans, and student loans. According to data from the Federal Reserve, consumer credit outstanding reached a record high of $4.24 trillion in November 2021, up from $3.77 trillion in November 2019. This increase in borrowing has helped to fuel economic growth in the short term, but it may also be a sign of trouble ahead.

For one thing, high levels of consumer debt can make households vulnerable to financial shocks such as job loss or unexpected expenses. If a family is already living close to their credit limit and they suddenly experience a reduction in income or an unforeseen expense, they may struggle to make their payments and end up defaulting on their debt. This can lead to a downward spiral of missed payments, collections, and damaged credit scores that can take years to recover from.

A significant consequence of continued overspending is a lowering of credit scores. A credit score is a numerical representation of a person’s creditworthiness, which ranges from 300 to 850. A higher credit score signifies that a person is more likely to pay back their debts and is considered a reliable borrower. In contrast, a lower credit score indicates a higher risk for lenders, and as a result, a person may have to pay higher interest rates on loans or credit cards.

According to recent data from the credit bureau Experian, the average American has a credit score of 711, which is considered “good.” However, this number is down from 713 in 2019, indicating that consumers are struggling to keep their credit scores afloat. One of the primary reasons for this trend is the increase in credit card balances, which rose by 14% in 2020, according to Experian.

But why are Americans continuing to exhaust their credit limits? One potential factor is the current state of the job market. Despite recent gains, the unemployment rate remains high, and many Americans are struggling to make ends meet. As a result, they may turn to credit cards to cover their expenses, leading to a cycle of debt that is difficult to break.

The potential troubles ahead for Americans who continue to exhaust their credit limits are manifold. The most obvious consequence is a lowering of credit scores, which can make it more difficult to obtain credit in the future. Additionally, a lower credit score can lead to higher interest rates, making it more expensive to borrow money.

Moreover, continued overspending can lead to a cycle of debt that is difficult to break. As debt levels increase, more and more of a person’s income goes towards paying off their debts, leaving little room for savings or other essential expenses. This situation can be particularly challenging for those living paycheck to paycheck, as they may have few options for reducing their debt burden.

So, what actions can Americans take in order to avoid potential troubles ahead and keep their credit scores intact? The first step is to create a budget and stick to it. By tracking their expenses and setting limits on their spending, Americans can avoid overspending and reduce their debt levels.

Another option is to seek help from a credit counseling service. These services can provide guidance on debt management, budgeting, and other financial issues, helping Americans get back on track.

So what else can be done to address this problem? One potential solution is to encourage households to save more and borrow less. This could be accomplished through a variety of measures, such as tax incentives for saving, education programs on financial literacy, and regulations that limit the amount of debt that can be taken on by households. By promoting a culture of saving and responsible borrowing, we can help to reduce the risks associated with high levels of consumer debt.

Yet another potential solution is to address the root causes of the problem, such as rising costs for housing, healthcare, and education. If these expenses were more affordable, households would be able to make ends meet without relying as heavily on credit cards and loans. This could be accomplished through a combination of policy interventions, such as increasing funding for affordable housing, expanding access to healthcare, and reducing the cost of higher education.

There’s yet another factor in play in regards to consumer overspending. In essence, high levels of consumer debt can drag down economic growth in the long term. When households are saddled with debt payments, they have less money available to spend on other goods and services. This can lead to a slowdown in consumer spending, which in turn can reduce demand for businesses and lead to layoffs and decreased investment. If enough households are struggling to make ends meet due to high levels of debt, it can create a ripple effect that spreads throughout the entire economy.

Ultimately, the issue of high levels of consumer debt is a complex one that requires a multifaceted approach. We need to address both the symptoms and the root causes of the problem in order to create a more sustainable and equitable economy. By working together to promote responsible borrowing and financial stability, we can help to ensure that all Americans have the opportunity to thrive and succeed.

Legal Rights Advocates offers a range of legal services to help consumers protect themselves and their financial well-being. This includes debt harassment. By working with an experienced attorney, consumers can protect themselves from harassment and potentially even have their debts reduced or eliminated. As the economy faces an uncertain future, it is more important than ever for consumers to take control of their financial situation and seek protection from qualified attorneys. Legal Rights Advocates stands ready to help consumers in need of legal assistance.

For more information about Legal Rights Advocates and their consumer protection services, visit their website at

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