New data released by TransUnion this week shows that the average credit card holder now carries a balance of over $6,000.
Data shows that 170.1 million Americans had a credit card balance in the second quarter of 2024. In the second quarter of 2024, their average balance was $6,329, an increase of about 5% year over year.
In 2021, the average debt per borrower was $4,828.
According to TransUnion’s report, more American consumers are turning to credit cards to “cope in this difficult economic environment.” The report also notes that 2.26% of accounts were over 90 days delinquent in the second quarter, an increase of 0.2 percentage points from 2023.
RELATED STORY | You need to carry fewer debit and credit cards thanks to Visa’s new features
“An even more pronounced divergence appears to exist when it comes to how different consumer segments are faring in this economic environment, and in particular how they are using their credit cards,” said Paul Siegfried, senior vice president at TransUnion, in a statement. “The riskier prime and below segments appear to be facing greater inflationary pressures and are therefore relying more heavily on their cards, as reflected in rising balances and higher usage.”
Credit card companies are expected to become more stingy
There are signs that a rise in delinquencies may cause credit card companies to become more hesitant to issue new accounts, with fewer new accounts issued in the first quarter of 2024 compared to the same period in 2022 and 2023.
“Lending will likely continue to decline for middle- and lower-end consumers as issuers look for less risky borrowers. We expect delinquency rates to continue to rise, even though growth is likely to slow,” Siegfried said.
RELATED STORY | Americans with record credit card debt carry their debt longer
Although fewer credit cards will be issued in 2024, people with very good credit scores – typically above 720 – have opened more accounts than in previous years.
Are credit card data an indicator of a declining economy?
If the 2008-09 recession is any indicator, credit card data may be an indicator of the health of the U.S. economy.
According to federal data, the default rate on commercial bank credit cards peaked at 6.77 percent in 2009. That rate quickly fell to less than 3 percent in 2012, although many economists say the U.S. recovery has taken much longer.
The rapid decline in delinquencies despite only a modest recovery in the U.S. economy was likely due to banks issuing fewer credit cards to consumers with poorer creditworthiness.
Although the unemployment rate in the United States is below the historical average, it has increased over the past year, reaching 4.3 percent in June, which is 0.8 percentage points higher than in July last year.
