Consumer debt in the US reached a record high this year, and now a report by the Federal Reserve Bank of New York has revealed that the total credit card debt is also at a new high.
The report shows that the total credit card debt has now reached $1 trillion for the first time and balances rose by $45 billion in the second quarter of 2023.
Global economic growth is still weak and some of the biggest economies are struggling, including the US. This has meant more people struggling to pay for their basic living costs.
According to the US Labor Department, the Consumer Price Index (CPI) rose 0.4% from September, which is a 7.7% increase since October 2021. This month was a lower increase than expected, but consumers are still facing very high prices for many items.
Higher prices mean more Americans now relying on expensive types of credit to pay their bills. This includes credit cards, which is one of the reasons indebtedness is at the highest level since 2003, which is when the Fed started collecting data.
Additionally, another report from the credit bureau TransUnion shows that many of those with large credit card bills are also students. Student payments have been on hold since April 2020, but it’s likely that they will resume in the coming weeks, adding an extra financial burden.
Liz Pagel, senior vice president at TransUnion said: “The majority of consumers with a student loan have not been required to make payments for the better part of three years. Payment amounts will vary, but many of these consumers have taken on additional debt since the last time they had to pay their student loans.
It’s important for both lenders and consumers to be prepared for this new payment shock. These additional credit products mean additional monthly payments, the accumulation of which may pose added challenges for households attempting to reintegrate student loan payments into their monthly budget.”