Americans are opening credit cards and racking up larger balances, pushing the country’s credit card debt to a new record high.
High interest rates, stubborn inflation and continued consumer spending are among the factors that have lifted collective credit card debt to an all-time high of $1.21 trillion, according to a New York Fed report. That’s up from $986 billion two years ago.
The latest data from the bank’s Consumer Credit Panel suggests Americans opened new credit card accounts around the holidays and continued to add debt, although not necessarily at an alarming rate.
In the fourth quarter of 2024, consumers added about 17 million credit cards, a major increase from about 5 million added during the same period a year earlier.
The good news: Americans took on less credit card debt in the quarter with balances rising by $45 billion, which compares to a $50 billion increase in the fourth quarter of 2023. Credit card balances will likely decrease again in the first quarter of 2025, based on seasonal post-holiday trends.
“Overall, consumers are in pretty good shape in terms of the household debt landscape, largely driven by stable balances and solid performance in mortgage loans,” New York Fed researchers wrote in a post commenting on the quarterly data release, which also examines mortgages, auto loans and other types of borrowing.
Still, credit card delinquencies are a point of concern that will need to be watched moving forward. In the fourth quarter, the share of credit card balances 90-plus days delinquent hit 11.35%, the highest level since the end of 2011.
However, a separate Kansas City Fed report in December explained that recent credit card delinquency trends aren’t as alarming as they seem on the surface. Revolving balances — the debt consumers actually carry past a billing cycle and owe interest on — were still below 2019 levels. “Stable revolving balances suggest households are not rolling over additional credit card debt and are thus better able to pay off balances,” the report said.
What to do if you’re struggling to make credit card payments
Are you among those falling behind on credit card payments? There are proven strategies that can help you get back on track and get out of debt.
First of all, find a budgeting tool and try to rein in your spending. For existing credit card balances, research approaches to debt like the “debt avalanche” and “debt snowball” methods.
You can also look into low or 0% APR credit cards and consider balance transfers or personal loans to avoid ultra-high credit card interest rates. Even though the Federal Reserve has cut benchmark interest rates by 1 percentage point since September, the average credit card APR is still over 20%.
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According to a report from Money.com, Americans are facing record high credit card debt, with the total amount reaching $1.21 trillion. This is a significant increase from just two years ago when the total was $986 billion.
The rise in credit card debt can be attributed to several factors, including high interest rates, inflation, and continued consumer spending. The New York Fed’s Consumer Credit Panel found that in the fourth quarter of 2024, consumers added about 17 million new credit cards, a major increase from the 5 million added during the same period in 2023.
While this may seem alarming, the report also notes that Americans took on less credit card debt in the fourth quarter, with balances rising by $45 billion compared to a $50 billion increase in the same period in 2023. Additionally, it is expected that credit card balances will decrease in the first quarter of 2025, following seasonal post-holiday trends.
Despite this, there is still cause for concern as credit card delinquencies have reached their highest level since 2011, with 11.35% of balances being 90-plus days delinquent. However, a separate report from the Kansas City Fed suggests that this may not be as alarming as it seems, as revolving balances (the debt carried over from one billing cycle to the next) are still below 2019 levels.
For those struggling to make credit card payments, there are strategies that can help. Creating a budget and cutting back on spending is a good place to start. Additionally, researching methods like the “debt avalanche” and “debt snowball” can help individuals pay off their existing credit card balances.
Other options include looking into low or 0% APR credit cards, balance transfers, or personal loans to avoid high interest rates. Despite the Federal Reserve cutting benchmark interest rates, the average credit card APR is still over 20%. It is important for individuals to take action and find ways to manage their credit card debt to avoid financial struggles in the future.
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