Credit Card Debt Reaches $1T For First Time 

For the first time ever, consumer credit card debt has crossed the $1 trillion threshold.

A new report published earlier this week by the New York Federal Reserve showed that Americans are relying on credit cards to make charges to cover their everyday expenses, with the total amount of consumer debt on credit cards crossing $1 trillion by the end of June.

From April through June, total debt on credit cards increased by 4.6% from the quarter before it. Americans added $45 billion in credit card debt in those months, reaching a total amount of $1.03 trillion. That’s the highest mark that the Fed has ever tracked, since it first started measuring total consumer credit card debt back in 2003.

This shows that many Americans are still struggling to pay for their everyday expenses, even as inflation seems to be cooling somewhat. The concerning thing about all this added credit card debt isn’t just that Americans can’t seem to afford their lives; it’s that this debt is becoming extremely expensive, with interest rates rising out of control.

According to a database maintained by Bankrate, the average APR for credit cards reached 20.33% last week, which is a new record. Bankrate has been tracking this information since 1985. The previous high water mark for average APR happened back in July of 1991, when it was 19%.

With interest rates being so high, it makes it very difficult for people who carry large balances to actually pay down that debt – especially if all they’re doing every month is paying their minimum payment. This is something that Lending Tree’s chief credit analyst, Matt Schulz, pointed to when he said:

“One trillion dollars in credit card debt is staggering. Unfortunately, it is likely only going to keep growing from here.”

Because of this increasing credit card debt, total household debt in the U.S. reached $17.06 billion, which represents an increase of 0.1% from the first quarter of 2023. Data shows that debt balances today are $2.9 trillion more than they were a few months before the COVID-19 pandemic started.

It’s not just credit card debt balances that are rising, either. Balances on auto loans increased 4.3%, or $20 billion total, during the second quarter of 2023. Mortgage balances remained about the same at $12 trillion, even though originations of mortgages went up in the second quarter compared to the first quarter.

If there is any good news to the recent debt reports, it’s that overall delinquency rates are relatively small. That being said, more and more Americans are starting to struggle meeting their auto loan and credit card payments.

Roughly 2.7% of all outstanding debt was in a delinquency stage, only a 0.1% increase from the first three months of 2023. That number is actually 2% lower than it was before the pandemic.

Financial experts say that the good news isn’t really all that good, though. With a strong labor market, delinquency rates should be declining, not increasing – even if only a little bit. This could foreshadow more tough times ahead.