According to a new New York Federal Reserve report released Tuesday, American credit card debt has surpassed $1 trillion for the first time ever.
Total credit card debt surged in the three month period from April to June, reaching $1.03 trillion, a surge of $45 billion, or 4.6% over the previous quarter. It is the highest level seen in Fed data extending back to 2003.
Making the increase in debt even more worrisome is the fact that interest rates are so high right now. Last week the average annual percentage rate for credit cards, or APR, reached a new record of 20.33%, according to a database from Bankrate. According to the database, which extends back to 1985, the previous record was in July of 1991, when it was 19%.
Matt Schulz, chief credit analyst at LendingTree said, “One trillion dollars in credit card debt is staggering. Unfortunately, it is likely only going to keep growing from here.”
Total household debt was driven up by the increase in the credit card category, to $17.06 billion, a 0.1% increase over the first three months of 2023. Looking back to before the Covid-19 pandemic began, since the end of 2019, balances have risen $2.9 trillion.
Auto loan balances also were a part of the increase, rising by $20 billion, or 4.3% over the second quarter. Student loan debt declined by $35 billion and balances on mortgages, at $12 trillion, were largely unchanged.
Although not significant, there was a small increase in borrowers with credit card and auto-loan payments who were struggling. Delinquencies rose from 2.6% in the first quarter to 2.7% of outstanding debt. That is still 2 percent lower than the level seen before the pandemic.
However analysts say any increase, no matter how small, in delinquencies during such a strong labor market is concerning. In addition, the rate is expected to begin to rise higher after student loan repayments resume in the fall, following the Supreme Court striking down President Biden’s forgiveness plan.
Schulz said, “Even as inflation has lingered and interest rates have risen, pushing card debt to record levels, Americans have generally done a good job paying their credit card bills on time.”
“That may not last, however. The resumption of student loan payments will be a huge test for many cardholders, shrinking the amount they have to devote to paying off card debt and leaving some people simply unable to make minimum payments at all.”
