Record High Credit Card Balances: Americans Take on More Debt than Ever Before
Americans are taking on more debt than ever before, and credit card balances hit a record high in the fourth quarter of 2022. According to the New York Federal Reserve’s Quarterly Report on Household Debt and Credit, total household debt reached $16.9 trillion in the fourth quarter of last year, up $394 billion from the prior three-month period. Credit card balances rose 6.6% to $986 billion during the quarter, the largest quarterly growth on record.
The New York Fed researchers noted that borrowers in their 20s, 30s, and 40s are missing credit card payments and transitioning into serious delinquency at higher rates than pre-pandemic. Wilbert van der Klaauw, economic research advisor at the New York Fed, attributed this surge in credit card debt to higher consumer prices, climbing interest rates, and strong consumer spending. Moreover, the New York Fed’s 2023 Consumer Credit Forecast by TransUnion expects serious credit card delinquencies to increase to 2.6% by the end of 2023 from 2.1% at the end of 2022.
To alleviate this growing debt, balance transfer credit cards can help cardholders become debt-free more quickly. By transferring balances to a balance transfer credit card with lower interest rates, cardholders can focus on paying down the principal balance of their debt rather than just paying interest charges. However, a Bankrate survey found that 37% of those with credit card debt don't know that balance transfer offers even exist.
While the Federal Reserve’s recent rate increases have pushed credit card APRs to their highest levels in decades, balance transfer credit cards with 0% intro APR offers are still available. Lending Tree’s chief credit analyst Matt Schulz recommended such cards as “Americans’ best weapons in the fight to reduce credit card debt.”
Overall, the situation is concerning and Americans should be mindful of the amount of debt they are taking on. To stay on top of their debt, borrowers should consider balance transfer credit cards and make sure to pay off the balance before the 0% window expires. As interest rates continue to rise, it is more important than ever for Americans to be mindful of their debt and make sure to pay it off in a timely manner.
0. “US credit card debt soars: What to know about rates, balance transfers” Detroit Free Press, 16 Feb. 2023, https://www.freep.com/story/money/personal-finance/susan-tompor/2023/02/16/credit-card-debt-us-rate-balance-transfers/69906810007/
1. “US Household Debt Surges as Young Borrowers Struggle With Loans By Bloomberg” Investing.com UK, 16 Feb. 2023, https://uk.investing.com/news/economy/us-household-debt-surges-as-young-borrowers-struggle-with-loans-2917707
2. “U.S. household debt climbs by $394B in Q4, largest increase in two decades: NY Fed” Seeking Alpha, 16 Feb. 2023, https://seekingalpha.com/news/3937286-us-household-debt-climbs-by-394b-in-q4-largest-increase-in-two-decades-ny-fed
3. “Consumer credit increased by nearly $30 billion, experts expect record delinquencies in 2023” Fox Business, 16 Feb. 2023, https://www.foxbusiness.com/personal-finance/inflation-consumer-credit-increased-delinquencies-2023
4. “Almost 40% of Americans Don't Know About This Fast Way to Pay Down Credit Card Debt.” jacksonprogress-argus, 14 Feb. 2023, https://www.jacksonprogress-argus.com/arena/almost-40-of-americans-don-t-know-about-this-fast-way-to-pay-down-credit/article_50fbe296-b2ad-534f-95c2-c3ac9bfec443.html
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