Americans’ private household debt is higher today than ever before. According to a report by the New York Fed, credit card debt in the US is rising rapidly and touchingThe peak value of 1.14 trillion dollars will be reached in the 2024 quarter.
In addition to household and lifestyle debt, credit card transactions also include student loan expenses, mortgages and revolving home equity loans. About 4.9% of customers also have a third-party collection account on their credit account.
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Credit card debt in the US could continue to rise as the holiday season approaches
Average credit card spending increased by $109 billion in the second quarter of 2024, representing a 0.6% increase in debt compared to the first quarter of 2024. “Total household debt increased by $109 billion in the second quarter of 2024, an increase of 0.6% from the first quarter of 2024. Debt now stands at $17.80 trillion and has increased by $3.7 trillion since late 2019, just before the pandemic-induced recession,” say the authorities.
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Impact on consumer spending
Credit card debt has skyrocketed even as Americans meet their job demands. “You can see that their spending has increased by about 3% so far this year compared to last year, in July and August,” John Moynihan, CEO of Bank of America, told Fox News.
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The role of the Federal Reserve
The Federal Reserve must be cautious and set interest rates so that the economy and consumption do not slow down. It must also smooth out the transition rates for late payments on credit cards to protect the economy. This includes encouraging customers to opt for automatic payments, among other things.
Possible risks
Higher credit card debt only occurs when the economy is booming. If a recession or downturn hits the U.S. economy, delinquencies and defaults could skyrocket, causing banks to pile up massive debts.
Future prospects
With the holiday shopping season beginning next quarter, consumer spending in America will continue to rise, and is expected to reach a new high by the end of the current fiscal year.
