US credit card debt hits record $1.17 trillion: New York Fed research

Cumulatively, citizens of the US, now owe a new record setting $1.17 trillion on their credit cards, according to a recent report on household debt from the Federal Reserve Bank of New York, as explained in a report by CNBC.

It is important to note that Credit card balances jumped by $24 billion in the third quarter of 2024 and are 8.1 per cent higher than a year ago, the CNBC report detailed further.

More important facts to take a note

Despite that increase, credit card delinquency rates improved with 8.8 per cent of balances transitioning to delinquency over the last year, compared with 9.1 per cent in the previous quarter, the New York Fed found. That change could “suggest that rising debt burdens remain manageable,” the New York Fed researchers said on a press call November 13. “Overall, balance sheets look pretty good for households,” the researchers added.

Credit card debt has stay stable for the last 20 years

Credit card debt has remained stable over the last two decades, however, in the years since the pandemic, households largely spent down their excess savings, which sparked a rebound in credit card balances. Consumer spending continues to remain strong, despite high borrowing costs.

This means that people are now spending borrowed money more freely. But now, growth in credit card balances has slowed, a separate quarterly credit industry insights report from TransUnion also found.

The average balance per consumer stands at $6,329, rising only 4.8 per cent year over year, compared with an 11.2 per cent increase the year before and 12.4 per cent the year before that, TransUnion found. In the last three months, 42 per cent of Americans said their total debt hasn’t changed, while 28 per cent of have seen their debt rise, according to another survey by Achieve, which helps consumers manage debt.

Of the latter group, most said the increase was due to the ongoing difficulty of making ends meet. Others cited general overspending and a lost job or reduced wages. Achieve polled 2,000 adults with one or more kinds of consumer debt in October.

“Across the board, unemployment is low and wages have risen, but those macroeconomic conditions aren’t felt equally across the population, especially for consumers who live in areas where the impact of inflation is the greatest,” Brad Stroh, Achieve’s co-founder and co-CEO, said in a statement, the CNBC report mentioned further. 

Credit card rates still top 20 per cent

Still, credit cards have become one of the most expensive ways to borrow money. Lower-income households, who had to stretch to cover price increases, have been hit very hard after the Federal Reserve’s string of 11 interest rate hikes lifted the average credit card rate to more than 20 per cent, near an all-time high. 

Even as the Fed lowers its benchmark, the average credit card rate has barely budged. For those with variable rate debt, such as credit cards, “it’s obviously going to help if rates come down,” the New York Fed researchers added. However, “the borrowing amount is more important than the interest rate,” they added.

This is an extremely concerning sign for the US government and the Federal Reserve. The world’s biggest economy is now facing serious challenges in financing their debt due to its sheer size.