Credit Card Debt Reaches New High of $1.17 Trillion, New York Fed Reports

Americans now face an unprecedented credit card debt total of $1.17 trillion, according to a recent study by the Federal Reserve Bank of New York.

In the third quarter of 2024, credit card debt increased by $24 billion, marking an 8.1% rise from the previous year.

Despite this growth in borrowing, the rate of delinquency has improved. Over the past year, 8.8% of balances moved to delinquency, down from 9.1% in the earlier quarter, the New York Fed observed. This improvement might hint that the increasing debt loads are still manageable, according to the researchers at the New York Fed, who shared these insights in a call with the press.

"Household balance sheets generally appear healthy," added the researchers.

Patterns and Implications of Increasing Credit Debt

Credit card debt levels were stable for the past twenty years, but the post-pandemic era saw households depleting their surplus savings. This led to a revival in credit card spending. Consumer spending is robust despite elevated borrowing costs.

However, there is now a deceleration in the growth of credit card balances, a trend also noted in a separate TransUnion quarterly report.

An examination of individual consumer balances reveals an average of $6,329. This figure has increased year-over-year but at a slower pace of growth than the jumps of 11.2% and 12.4% in the preceding years, according to TransUnion.

Among surveyed Americans, 42% indicated their overall debt levels remained static in the past three months. Meanwhile, 28% acknowledged an increase, based on findings from a survey by a consumer debt management company.

Those witnessing a rise attributed it mostly to challenges in covering basic expenses, excessive spending, unemployment, or salary cuts. The survey involved 2,000 adults with at least one form of consumer debt, conducted in October.

"While unemployment rates are low and wages have climbed, these economic benefits aren't felt equally, especially in regions where inflation is most intense," stated Brad Stroh, co-CEO of Achieve.

Interest Rates on Credit Cards Exceed 20%

Credit card borrowing costs remain among the highest.

Lower-income families, striving to make ends meet, have been particularly affected by a series of eleven rate hikes by the Federal Reserve, which has pushed average credit card rates to over 20%, a near record.

Although the Fed is now decreasing its key rates, credit card rates remain unchanged.

For those managing variable-rate debt, such as credit cards, declining rates could potentially offer some relief, noted the New York Fed researchers.

Nevertheless, they added that the principal borrowing amount carries more significance than the rates themselves.