America’s credit card debt has hit $1 trillion for the first time on record, a worrying indication that interest rates and failures to repay debt may increase.
Consumers now owe a record $986 billion on their charge cards, up 17 percent from a year earlier, several news reports mentioned, citing the Federal Reserve Bank of New York data.
That’s the highest level on record and $193.4 billion more than the start of 2023 and $264 billion above the $736 billion in April 2021, the lowest level since the onset of the Covid-19 pandemic, according to a report on the Yahoo Finance website.
Moneycontrol couldn't verify the report independently.
Experts say as inflation climbed to near 40-year-high levels, many consumers have used plastic money to support their budgets.
The sky-high interest rates on credit cards continue to contribute to a significant increase in debt, and there is a concern that defaults, particularly among younger borrowers, could see an uptick.
"Consumers are going to have to resume their payments of federal student loans soon," VantageScore President and CEO Silvio Tavares told the website, adding that the “problem is that if they haven't had to pay a loan for three years, a lot of people don’t have that money in their budget.”
Notably, credit card balance grows every month whether a consumer spends more or not, based on the credit card issuer's average monthly interest rate.
As per the New York Fed, the youngest Americans aged 18-29 years had the highest credit card delinquency rates in the first quarter of 2023. At least 8.5 percent were at risk of slipping 90-plus days behind on payments. This was followed by 30 to 39-year-olds, which had a delinquency rate of 6.1 percent, while those 40 and up carried delinquency rates of less than 5 percent, the report said.
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