Credit card debt hits record $1.29 trillion

Record credit card debt

Americans collectively owe $1.29 trillion on credit cards, a record high. Balances climbed $22 billion in the third quarter and are up 4.2% from a year earlier.

Average balance per person

The average credit card balance per consumer now stands at $6,678, up 2.4% year over year. The number of cardholders rose 2% to 178 million from 174.8 million.

Why credit cards are expensive

The average interest rate on a new credit card offer is about 24%. Credit cards remain one of the most expensive ways to borrow, even though they are more accessible than other loans.

“Credit cards continue to be one of the most expensive ways to borrow.”

Rising distress among borrowers

An increasing share of new credit cards have gone to borrowers with lower incomes and credit scores. Those accounts are now showing higher levels of distress, the New York Fed researchers said.

Loosened lending after pandemic

After credit card issuers loosened their lending standards during the Covid pandemic, delinquency rates rose in the years that followed, according to New York Fed researchers.

Inflation squeezes low-income households

Macroeconomic headwinds including high inflation and rising borrowing costs have squeezed consumers. Inflation has outpaced wage growth for low-income brackets, the New York Fed said.

Damage already done

Higher prices and higher rates have pushed more people into debt. Even though growth is slowing, from a household finance standpoint, a lot of damage has been done, analysts say.

“from a household finance standpoint, a lot of damage has been done”