Record Credit Card Debt: A Growing Concern for American Households
The latest report from the Federal Reserve Bank of New York reveals a staggering $1.17 trillion in credit card debt owed by Americans, marking a significant increase of $24 billion in just the third quarter of 2024. This represents an 8.1% rise from the previous year, sparking concerns about the sustainability of household debt.
Credit Card Delinquency Rates Improve, But Risks Remain
Despite the growing debt burden, credit card delinquency rates have shown a slight improvement, with 8.8% of balances transitioning to delinquency over the last year, compared to 9.1% in the previous quarter. While this may suggest that households are managing their debt relatively well, experts warn that rising borrowing costs and stagnant wage growth could soon take its toll.
Consumer Spending Remains Strong, But Credit Card Growth Slows
According to a separate report by TransUnion, consumer spending continues to drive credit card usage, but the growth rate has slowed significantly. The average balance per consumer now stands at $6,329, representing a modest 4.8% year-over-year increase, down from 11.2% and 12.4% in previous years.
Households Struggle to Make Ends Meet
A recent survey by Achieve reveals that 28% of Americans have seen their debt rise in the last three months, citing the ongoing difficulty of making ends meet as the primary reason. Others pointed to general overspending and job loss or reduced wages as contributing factors.
Credit Cards Become One of the Most Expensive Ways to Borrow
With the average credit card rate hovering around 20%, near an all-time high, lower-income households are being disproportionately affected. The Federal Reserve’s interest rate hikes have exacerbated the issue, making it increasingly difficult for these households to manage their debt.
Experts Weigh In: Borrowing Amount Matters More Than Interest Rate
While a decrease in interest rates may provide some relief, experts emphasize that the borrowing amount is a more critical factor in determining debt sustainability. As households continue to rely on credit cards to make ends meet, the risk of debt spiraling out of control remains a pressing concern.
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