US credit card debt hits new high of $1.14 trillion

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

Outstanding balances grew to $1.14 trillion, up $27 billion from the previous quarter, and have now stubbornly remained at or near that figure for three straight quarters. Credit card delinquencies, defined as being more than a month behind on required minimum payments, also rose, reaching an annualized rate of 9.1%.

“I wish I could say I was surprised, but I’m not,” said Mark Elliot, Chief Customer Officer of Lending Club“One of the things we’ve seen over the last few years is an increase in consumer reliance on credit cards. Much of this is not driven by unemployment, as we’ve seen in the past, but by inflation and the need to make ends meet.”

In addition to record-high balances, average credit card APRs hit 21.51% in November, just shy of the record-high 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 rising credit card debt. Home equity lines of credit rose $4 billion, the ninth straight quarterly increase, and auto loans rose $10 billion in the same 90-day period, the FRBNY report found. Some are also leaning more on short-term loans in the buy now, pay later format; BNPL usage on Cyber ​​Monday 2023 rose 42.5% year over year, according to Adobe Analytics.

Federal student loan repayments may be adding to credit card users’ distress. Repayments resumed for an estimated 44 million borrowers last October, leaving them with one more monthly debt payment to manage. Borrowers were given a grace period until Sept. 30, 2024, to begin paying down their loans without impacting 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, get back to basics with a clear budget and repayment plan. See if you can get a balance transfer credit card with a longer balance transfer period, which can give you some relief from interest payments for a while and help you reduce your debt. If your debt seems insurmountable, consider a debt consolidation loan or debt settlement.

To avoid future debt, consider treating your credit card like a debit card to prevent overspending. If you’re someone who tends to carry a balance, resist the temptation to get another credit card just for the sign-up bonus, as the accrued interest will quickly negate any benefits or rewards.

“Develop a repayment strategy. Look for options to consolidate,” Elliot said. “There are a lot of educational resources available to help you get to a better place.”