Credit card debt hits record high as Americans struggle with cost-of-living
· Axios
Americans' credit card balances hit a record $1.29 trillion in the third quarter, according to a new report released by the Federal Reserve Bank of New York.
Why it matters: Falling behind on credit card payments can trap struggling households in a cycle of fees, damaged credit and increasingly expensive borrowing. The latest figures show that financial pain is concentrated in lower-income communities, even as delinquency rates improve nationally.
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By the numbers: Consumer credit card balances rose by $22 billion in the third quarter, an increase of 1.7%. That's $52 billion higher than a year earlier.
- The figures aren't adjusted for inflation, meaning some of the increase reflects higher prices rather than greater borrowing in real terms.
- Total household debt, including mortgages and student and auto loans, rose $334 billion, reaching a record $19.1 trillion in the third quarter. The total is up $5 trillion since 2019, just before the pandemic.
Yes, but: Fewer credit card balances are becoming seriously delinquent, a sign of some improvement in Americans' ability to keep up with payments.
- The rate at which credit card debt becomes seriously overdue edged down to 6.9% in the third quarter, though it remains notably above the 5.2% recorded before the pandemic.
Between the lines: A separate report from the New York Fed on Tuesday showed Americans in lower-income neighborhoods are having a harder time keeping up with credit card payments relative to their wealthier counterparts.
- Delinquency rates remain above pre-pandemic levels across all neighborhood-income groups, with the gap between the richest and poorest areas increasing since 2022.
- In the lowest-income neighborhoods, 10.3% of credit card balances became seriously delinquent over the past year — more than double the 4.4% rate in the wealthiest neighborhoods.
The big picture: Average credit card balance per borrower is now $6,678, according to TransUnion's Q3 insights report.
- Borrowers under 30 had the highest rate of credit card debt newly becoming at least 90 days overdue, the Fed's report found.
What we're watching: Democrats won the midterms promising to lower prices — but delivering relief that voters can actually feel in their household budgets will be difficult to fulfill.