- As the Federal Reserve Bank of New York announced on Tuesday, the US debt totals $1.14 trillion.
- According to a new report from TransUnion, the average credit card balance is currently $6,329.
- As consumers turn to credit cards, more borrowers are falling behind on their payments, both reports show.
Credit card debt is increasing.
As the Federal Reserve Bank of New York announced on Tuesday, Americans’ credit card debt currently stands at a record high of $1.14 trillion.
The average balance per consumer is $6,329, up 4.8% from a year ago, according to a separate quarterly credit industry report from TransUnion.
The number of credit card delinquencies is also higher overall, the New York Fed and TransUnion found. Last year, about 9.1 percent of credit card balances went into default, the New York Fed reported.
Borrowers with revolving debt “are maxing out their credit cards,” says Michele Raneri, vice president and head of U.S. research and consulting at TransUnion. “That’s usually a pretty good indicator that people are at their limit.”
It’s time to reevaluate revenge spending
“Credit card balances briefly declined in 2020 and early 2021 due to pandemic-related factors,” said Ted Rossman, senior industry analyst at Bankrate. Factors included government-provided stimulus checks and fewer opportunities to spend money.
“But since the beginning of 2021, credit card balances have skyrocketed 48%, fueled by a post-pandemic boom in services spending, as well as high inflation and interest rates,” he said.
As a recent report from Bankrate shows, consumers have shown a remarkable willingness to spend money on travel and entertainment to make up for the experiences they lost during the Covid years.
“Maybe people can reevaluate this now,” Raneri said.
The rise in “revenge spending” has been going on for several years now, she added. “Maybe there’s a way to position them so that they can check off some of the things they think they missed and get back to normal.”
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Credit cards are one of the most expensive ways to borrow money, with average credit card fees exceeding 20%—nearly an all-time high.
“With credit card balances at an all-time high and average credit card interest rates at record highs, it’s more important than ever to pay off that debt as quickly as possible,” Rossman said.
If you carry a balance, try consolidating and paying off high-interest credit cards with a lower-interest personal loan or switching to a no-interest balance transfer credit card, he advises.
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