US Household Debt & Credit Reaches Record Highs – Options to Help Manage Debt
By The New York Federal Reserve Bank released its Quarterly Report on Household Debt and Credit on Thursday, revealing that U.S. household debt and credit climbed to a record $16.9 trillion during the fourth quarter of 2022.[0] Credit card balances surged to $986 billion, surpassing the pre-pandemic high of $927 billion, while mortgage, auto loan, and student loan balances also grew significantly.[1]
The report also found that the share of debt transitioning into delinquency increased for nearly all debt types, with transition rates into early delinquency for credit cards and auto loans increasing by 0.6 and 0.4 percentage points, respectively.[2] Those for mortgages upticked by 0.15 percentage points, while those for student loans remained flat as the federal repayment pause remains in place.
Younger borrowers in their 20s and 30s are particularly struggling with credit card and car loan payments, with 3.2% and 1.2%, respectively, falling three months behind on payments.[3]
Americans are facing decades of high inflation and the Federal Reserve has implemented a series of rate increases, coinciding with the growth in credit card debt.[4] As reported by Bankrate, the average credit card rate has reached its highest point in 30 years, at 19.9%, and may keep going up.[5]
Unfortunately, more than a third of U.S. adults with credit card debt don’t even know that balance transfer credit cards exist.[5] These cards offer 0% APR for a set period of time, making it easier to pay down debt. If you qualify for that 0% rate, look for a card with the longest promotional period and make a plan to pay off your balance before it expires.[6]
For those struggling with mortgage payments, refinancing to a lower interest rate can help reduce monthly payments.[7] You can visit Credible to get your personalized rate and speak with a mortgage refinancing expert to see if this option is right for you.[8]
Overall, it’s important to be mindful of rising interest rates and take advantage of available options to manage debt. Balance transfer credit cards and refinancing can help reduce monthly payments and get debt under control.[9]
0. “Household debt hit record $16.9 trillion last quarter | Business | abc12.com” WJRT, 16 Feb. 2023, https://www.abc12.com/news/business/household-debt-hit-record-16-9-trillion-last-quarter/article_9eae8e3f-28d5-5d6b-ad7f-0e30b38a99bb.html
1. “US credit card debt at record high: New York Fed Household Debt report” USA TODAY, 16 Feb. 2023, https://www.usatoday.com/story/money/economy/2023/02/16/credit-card-debt-record-high-and-delinquencies-rising/11271305002/
2. “US household debt grows to nearly $17T as credit cards pass pre-pandemic high” Proactive Investors USA, 17 Feb. 2023, https://www.proactiveinvestors.com/companies/news/1006581/us-household-debt-grows-to-nearly-17t-as-credit-cards-pass-pre-pandemic-high-1006581.html
3. “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
4. “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/
5. “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/
6. “The ‘sandwich generation' is racking up an average of $7,000 on their credit cards as the Americans' total balances …” Yahoo Life, 17 Feb. 2023, https://www.yahoo.com/lifestyle/sandwich-generation-racking-average-7-130000824.html
7. “Consumer credit increased by nearly $30 billion, experts expect record delinquencies in 2023” FOX 7 Austin, 16 Feb. 2023, https://www.fox7austin.com/money/inflation-consumer-credit-increased-delinquencies-2023
8. “Mortgage delinquency rates fell to near record lows: CoreLogic” Fox Business, 16 Feb. 2023, https://www.foxbusiness.com/personal-finance/mortgage-delinquency-rates-near-record-low
9. “This is the best strategy to pay down credit card debt — but 37% of borrowers don’t know about it” CNBC, 13 Feb. 2023, https://www.cnbc.com/2023/02/13/borrowers-are-missing-the-best-way-to-pay-down-credit-card-debt-.html
