US credit card debt passes $1 trillion for the first time

Credit card debt in the US surpassed $1 trillion for the first time in history, the Federal Reserve Bank of New York reported on August 8. Total household debt increased by $16 billion in the quarter, totalling around $17 trillion.

For seven quarters, credit card balances in the US have grown year on year. “The second quarter of 2023 saw a brisk 16.2% increase from the previous year, continuing this strong trend,” said the New York Fed.

Delinquency rates in the quarter remained both low and roughly flat. There is little evidence of widespread household distress, it found. “Compared to other debt categories this quarter, credit card balances saw the most pronounced worsening in performance, following a period of extraordinarily low delinquency rates during the pandemic.”

The previous two quarters appear to show stabilisation in credit card delinquency rates.

Rising credit card balances could cause a problem for some consumers, researchers warned. When student loan repayments resume in October, there could be even more pressure on borrowers.

But the NY Fed said there were plenty of signs credit was stabilising near its pre-pandemic levels “albeit with higher nominal balances”.

“Credit card balances increased by $45 billion, from $986 billion in Q1 2023 to a series high of $1.03 trillion in the Q2 2023, marking a 4.6% quarterly increase,” said the New York Fed. Five and a half million new credit card accounts were opened in the quarter.

Joelle Scally, regional economic principal at the NY Fed, said: “Credit card balances saw brisk growth in the second quarter… and while delinquency rates have edged up, they appear to have normalised to pre-pandemic levels.”