Data Analysis on Credit Card Debt: Rate of Consumption and Impact on Individuals and the US Economy

TL;DR

This paper examines the evolution, causes, and consequences of credit card debt in the US, highlighting its impact on individuals and the economy, and proposing strategies for responsible management and policy reform.

Contribution

It provides a comprehensive analysis of credit card debt dynamics, combining historical context, empirical data, and policy recommendations to address financial challenges.

Findings

Credit card debt is influenced by personal consumption and GDP growth.

Financial literacy and responsible use reduce credit card debt levels.

Strategies like education and policy reforms can mitigate debt-related issues.

Abstract

This paper provides a comprehensive examination of the evolution of credit cards in the United States, tracing their historical development, causes, consequences, and impact on both individuals and the economy. It delves into the transformation of credit cards from specialized merchant cards to ubiquitous financial tools, driven by legal changes like the Marquette decision. Credit card debt has emerged as a significant financial challenge for many Americans due to economic factors, consumerism, high healthcare costs, and financial illiteracy. The consequences of this debt on individuals are extensive, affecting their financial well-being, credit scores, savings, and even their physical and mental health. On a larger scale, credit cards stimulate consumer spending, drive e-commerce growth, and generate revenue for financial institutions, but they can also contribute to economic instability if not managed responsibly. The paper emphasizes various strategies to prevent and manage credit card debt, including financial education, budgeting, responsible credit card uses, and professional counselling. Empirical studies support the relationship between credit card debt and factors such as financial literacy and consumer behavior. Regression analysis reveals that personal consumption and GDP positively impacts credit card debt indicating that responsible management is essential. The paper offers comprehensive recommendations for addressing credit card debt challenges and maximizing the benefits of credit card usage, encompassing financial education, policy reforms, and public awareness campaigns. These recommendations aim to transform credit cards into tools that empower individuals financially and contribute to economic stability, rather than sources of financial stress.