Consumer spending remains strong as a mountain of credit card debt continues to pile up, with Americans increasingly turning to plastic to fund their purchases. According to the Federal Reserve Bank of New York, credit card debt reached $1.14T in Q2, up 5.8% from a year earlier, or about $6,500 per person. While the steadily rising figure took a break during the pandemic years, it has soared since 2022 as many consumers swipe away to counter their dwindling purchasing power.
Driving the Spike
Inflation
Inflation growth has come down from record highs, but prices remain elevated compared to several years ago.
Consumers are relying on credit cards to finance everyday goods and services, increasing non-discretionary balances.
Student Loan Repayments
The resumption of student loan repayments has contributed to the increase in credit card debt.
Millennials and Gen-Z are particularly affected.
Lifestyle Maintenance
Many consumers are finding it difficult to pare back their lifestyles despite price pressures.
Interest Rates
High APRs
The average annual percentage rate (APR) is now over 20%.
This is higher than any point since the Fed started tracking card APRs in 1994.
High APRs make credit card debt particularly costly for consumers.
Overall U.S. Household Debt
Total Debt U.S. household debt topped $17.8T in Q2.
Delinquency Rates
Credit card delinquency rates are on the rise.
9.1% of credit card balances transitioned into delinquency as of June, up from 8.5% the previous quarter.
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