Credit card debt will bounce back in 2012

The nationwide total of credit card debt owed to the top six lenders in the U.S. is expected to increase somewhat significantly this year, reversing a trend of declines in credit card balances seen since soon after the recession began.

The analyst firm Moody’s Investors Service projects that the nationwide total credit card debt owed to the six largest lenders in the U.S. – American Express, Bank of America, Capital One Financial, Citigroup, Discover Financial and JPMorgan Chase – will grow some 6 percent in 2012 to a total of $517 billion, according to a report from MarketWatch. That’s after balances fell a total of 5 percent in 2011 to just $488 billion.

In fact, if the prediction holds true, it would be the first year since 2008, soon after the start of the recent national recession, in which credit card debt actually increased, the report said. That year, balances climbed to a total of $672 billion, with all lenders, not just the top six, included.

There are a few reasons for the continual slip in credit card debt totals seen over the last several years, the report said. For one thing, the recession likely caused many consumers to rethink their credit card spending habits, and they have since scaled back considerably on the amount they put on their accounts. In addition, many likely also faced financial difficulties so significant that they have since made continued efforts to reduce the amount they owe significantly. And of course, the amount of consumers who fell behind on their payments during the recession was significant enough that lenders had to write off billions of dollars worth of bad debt as being uncollectable.

But with the economy rebounding, many consumers are once again reaching for their credit cards when making payments as they may feel more comfortable in dealing with debt in general, the report said. Already, the last several months have seen the amount of revolving debt – which is typically associated with credit card balances – rise, even as the number of late payments and defaulted accounts remain near all-time low levels.

However, some experts say that the increases in consumer debt in the last few months of 2011 may be the result of seasonal spending on holiday gifts rather than a true return to pre-recession spending habits.

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