According to the report from economists at the New York Federal Reserve bank, US credit card debt continued to surge between July and September of this year, marking the eighth consecutive quarter of year-over-year increases. The report stated that credit card balances increased by $48 billion (4.7%) from the previous three months, and by $154 billion on an annual basis, which is the highest increase since records began in 1999. This surge brought the total outstanding credit card debt to a new record high of $1.08 trillion. In addition to credit card debt, mortgage balances also surged to $12.14 trillion, while student loan and auto loan balances rose to $1.6 trillion each, showing an increase in total household debt during the reporting period to $17.29 trillion, largely due to credit cards and student loans.
The researchers noted that more households were finding it difficult to manage their debt due to persistently high inflation and rising interest rates. According to the report, nearly 9.5% of credit card balances were more than 90 days delinquent in the reporting period, up from 8% in the second quarter. Researchers from the New York Fed accompanying the data said, “The increase in balances is consistent with strong nominal spending and real GDP growth over the same time frame. But credit card delinquencies continue to rise from their historical lows seen during the pandemic. The transition rate into delinquency remains below the pre-pandemic level for mortgages, which comprise the largest share of household debt, but auto loan and credit card delinquencies have surpassed pre-pandemic levels and continue to rise.”
Moreover, the spike in households transitioning into delinquency was considered “surprising” by researchers given the relative stability of the US economy and labor market. While the trend could stem from changes in lending standards, it could also signal “real financial stress”.
The report paints a concerning picture of the financial health of US households, with many struggling to manage their debt amid economic challenges. It highlights the need for financial education and support for individuals and families in managing their finances and navigating economic uncertainties.
This surge in credit card debt and delinquencies emphasizes the importance of understanding personal finance, budgeting, and managing debt. It serves as a reminder for consumers to be mindful of their spending and to seek the necessary resources and assistance if they are struggling to manage their debt.
The data provided by the New York Federal Reserve bank offers valuable insight into the challenges faced by US households and the impact of economic conditions on personal finances. It also underscores the need for proactive measures to address the issue of growing credit card debt and delinquencies, as well as the importance of promoting financial literacy and providing support for individuals and families to navigate these challenges.
Overall, the report serves as a call to action for policymakers, financial institutions, and individuals to work together to address the issue of rising credit card debt and delinquencies and to promote financial well-being for all Americans. By understanding the underlying factors contributing to this trend and taking proactive steps to address it, we can work towards creating a more financially secure future for households across the country.