US Credit Card Debt Reaches All-Time High as Inflation, Interest Rates Surge

On Thursday, the New York Federal Reserve Bank released its Quarterly Report on Household Debt and Credit, which revealed that credit card balances in the US had reached an all-time high in the fourth quarter of 2022, increasing by $61 billion to $986 billion. This surpassed the previous high of $927 billion set before the pandemic.^[0]

The report showed that total U.S. household debt had climbed to a record $16.9 trillion during the fourth quarter of 2022, an increase of 2.4% from the prior three-month period.^[1] Mortgage balances rose to $11.92 trillion, auto loan balances to $1.55 trillion, and student loan balances to $1.60 trillion.^[2] The share of current debt transitioning into delinquency increased for nearly all debt types, with the delinquency transition rate for credit cards rising by 0.6 percentage points.^[3]

Younger borrowers were struggling more, with growing numbers of those in their 20s, 30s, and 40s falling behind on their credit card and car payments.^[4] To help manage their debt and reduce interest charges, balance transfer credit cards can be used to put interest rate payments on hold for up to 21 months.^[5]

The sharp rise in credit card debt comes at a time when Americans have been wading through decades high inflation, which saw the central bank embark on a series of rate hikes. The average credit card rate, at 19.9%, is at its highest level in 30 years and could continue to rise, according to Bankrate.

In addition, the Mortgage Bankers Association reported that the delinquency rate for mortgage loans on one-to-four-unit residential properties increased to a seasonally adjusted rate of 3.96% of all loans outstanding at the end of the fourth quarter of 2022.^[6]

Overall, higher consumer prices and higher interest rates were cited as the main drivers behind record high credit card balances.^[7] Ted Rossman, senior industry analyst at Bankrate, noted that, “Robust consumer spending, the hottest inflation readings in 40 years, and sharply higher credit card rates have combined to push credit card balances to a new record high.”

Unfortunately, more than a third of U.S. adults with credit card debt don’t even know that balance transfer cards exist, according to a recent Bankrate survey.^[8]

0. “Credit card debt soars to new record as high inflation squeezes Americans” Fox Business, 16 Feb. 2023, https://www.foxbusiness.com/economy/credit-card-debt-soars-new-record-high-inflation-squeezes-americans

1. “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/

2. “Yikes! Consumer Credit Card Debt Rockets To Pre-Pandemic High | Crowdfund Insider” Crowdfund Insider, 17 Feb. 2023, https://www.crowdfundinsider.com/2023/02/202629-yikes-consumer-credit-card-debt-rockets-to-pre-pandemic-high

3. “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

4. “Younger Borrowers Are Falling Behind on Credit Card and Car Loans” Investopedia, 16 Feb. 2023, https://www.investopedia.com/younger-borrowers-are-falling-behind-on-credit-card-and-car-loans-7110917

5. “Almost 40% of Americans Don't Know About This Fast Way to Pay Down Credit Card Debt.” Rockdale Newton Citizen, 14 Feb. 2023, https://www.rockdalenewtoncitizen.com/arena/almost-40-of-americans-don-t-know-about-this-fast-way-to-pay-down-credit/article_6326c640-7845-5024-80d6-fccab65f650e.html

6. “Mortgage delinquency rose in Q4 with weaker economy, inflation” HousingWire, 16 Feb. 2023, https://www.housingwire.com/articles/weaker-economy-inflation-caused-mortgage-delinquency-uptick-in-q4

7. “Troubling signs emerge as credit card debt hits record high” AOL, 16 Feb. 2023, https://www.aol.com/troubling-signs-emerge-credit-card-160607715.html

8. “More Than 1/3 With Card Debt Don't Know About Balance Transfers” Bankrate.com, 10 Feb. 2023, https://www.bankrate.com/finance/credit-cards/how-much-money-a-balance-transfer-can-save-you/