Credit card debt in the US reaches new high of $1.14 trillion

According to the Federal Reserve Bank of New York’s latest Household Debt and Credit Report, credit card debt in America reached a new record high in the second quarter of 2024.

The outstanding balance rose to $1.14 trillion, up $27 billion from the previous quarter, and has now stubbornly remained at or near that number for three consecutive quarters. Credit card delinquencies, defined as more than one month behind on required minimum payments, also rose to 9.1 percent on an annual basis.

“I wish I could say I was surprised, but I’m not,” said Mark Elliot, LendingClub’s chief customer officer. “One of the things we’ve seen over the last few years is an increase in consumer reliance on credit cards, largely driven not by unemployment, as we’ve seen in the past, but by inflation and the need to make ends meet on a day-to-day basis.”

In addition to record balances, average credit card APRs reached 21.51% in November, just below the record high of 21.59% reached in the first quarter of 2024, according to the latest data from the Federal Reserve. Higher debt balances and higher APRs combine to create a one-two punch that further exacerbates the credit card debt crisis.

Many are borrowing more money to make ends meet — and it’s not just credit card debt that’s on the rise. Home equity lines of credit rose $4 billion, the ninth consecutive quarterly increase, and auto loan balances rose $10 billion over the same 90-day period, according to the FRBNY report. Some are also leaning more toward short-term loans in the form of “buy now, pay later”; BNPL usage on Cyber ​​Monday 2023 increased 42.5% year over year, according to Adobe Analytics.

Repaying federal student loans could be adding to the plight of credit card users. Repayments resumed for an estimated 44 million borrowers last October, leaving them with another monthly debt payment to contend with. Borrowers were given a grace period until Sept. 30, 2024, to begin paying off their loans without affecting their credit scores, so we won’t know the full impact of the resumption of payments until next fall.

Household debt and credit reports in 2024

If you’re struggling with credit card debt, you should get back to basics with a clear budget and repayment plan. Consider applying for a balance transfer credit card with an extended balance transfer period, which will provide you with interest relief for a period of time and help you pay down your debt. If your debt seems insurmountable, consider a debt consolidation loan or debt settlement.

To avoid future debt, treat your credit card like a debit card to avoid overspending. If you’re someone who tends to carry a balance, resist the temptation to apply for another credit card just because of the sign-up bonus, as the interest that accrues will quickly wipe out any perks or rewards.

“Develop a repayment strategy. Look for opportunities to consolidate,” Elliot said. “There are many educational resources to help you get to a better place.”