American Credit Card Debt Continues To Climb

Consumers are using credit cards more than ever but delinquency rates haven't increased—for now.

Credit card balances saw “brisk growth” in the second quarter of 2023, says a new report from the Federal Reserve Bank of New York. A 4.6% spike between the first and second quarters, from $986 billion to a whopping $1.03 trillion, might seem like a lot, but Bankrate senior analyst Ted Rossman sees the silver lining. 

“The big picture is it’s surprisingly positive,” Rossman argues. For all the recent talk of high inflation, rising interest rates, and recession worries, consumer spending has been resilient. Consumers are incurring debt, but delinquencies have been “pretty low.”

Indeed, delinquency rates were roughly flat in the second quarter, after declining sharply since the beginning of the Covid-19 pandemic.

“We tend to understate how strong the job market has been,” Rossman says. “It doesn’t always feel great because inflation has been gobbling up peoples wage gains, but the truth is, high wages and a low unemployment rate help keep most people on track.”

Credit card accounts expanded by 5.48 million to 578.35 million, while limits increased by $9 billion and now hover at around $4.6 trillion.

It’s worth noting, however, that debt is still something the average consumer still needs to address. Almost half of cardholders carry debt from month to month, Rossman notes, citing Bankrate data.

“That’s still significant,” he says. “The average interest rate is high and 60% of people with credit card debt have had it for at least a year. That’s up from 50% two years ago.”

Compared to other categories like student debt—a segment where balances fell by $35 billion and stood at $1.57 trillion between the first and second quarters—the rise in credit card balances was starkly worse.

Still, and despite the toll inflation has taken on consumers—currently, the US Inflation Rate is 3.18%—there is little evidence of widespread household distress, the New York Fed noted.

Analysts at Bank of America would likely disagree. An August Bank of America report found that the number of 401(k) participants taking so-called hardship withdrawals increased 36% year-over-year.