Credit card debt just passed the trillion-dollar mark for the first time ever in the US, according to new findings from the Federal Reserve Bank of New York.
In the second quarter of 2023, the period April 1 and June 31, total bank card balances shot up $45 billion to hit $1.03 trillion, an increase of more than 4%,
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“I think inflation is responsible for quite a bit of it,” Michele Raneri, vice president of U.S. research and consulting for credit reporting agency TransUnion, told CNET. “Everyday goods and services have been costing more over the past few years and consumers are using credit to fill the gap.”
Overall credit card debt has risen for five consecutive quarters, according to CNN. As the Federal Reserve has increased interest rates at a record pace, banks have followed suit: The average credit card interest rate is now 20.60%, according to CNET’s sister site Bankrate, a hair’s breadth from the all-time high of 20.69% reached in June.
Those credit card balances may look worse in October, when the pause on student loan payments comes to an end after more than three years.
“Consumers who have student loans will definitely have a payment shock,” Raneri said. “So I think there’s a real probability that we’ll see additional delinquency.”
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Student loan balances actually dropped $35 billion last quarter and now stand at $1.57 trillion. But that may be thanks to the Biden administration canceling more than 800,000 borrowers’ education debt in order to fix pre-existing issues with income-driven repayment plans.
According to the Fed’s latest Quarterly Report on Household Debt and Credit released Tuesday, auto loans increased $20 billion between the first and second quarters, an upward trajectory they’ve maintained since 2011, and now stand at $179 billion.
Other debt — including consumer loans and retail credit cards — jumped $15 billion.
Total household debt, meanwhile, is at $17.06 trillion, an increase of $16 billion. That figure has spiked $2.9 trillion since the end of 2019, before the COVID-19 pandemic.
“American consumers have so far withstood the economic difficulties of the pandemic and post-pandemic periods with resilience,” New York Fed researchers wrote in a blog post coinciding with the report.
“However, rising balances may present challenges for some borrowers,” they added, “and the resumption of student loan payments this fall may add additional financial strain for many student loan borrowers.”
