Credit card balances are swelling at the fastest rate in decades, reflecting higher prices and more open accounts than ever before.
Why is this important: Debt will become more expensive for borrowers to bear as the Fed rapidly raises interest rates to rein in searing inflation. There are warning signs that low-income consumers are starting to fall behind on payments.
Two new stats – courtesy of New York Fed – tell the story:
- Credit card debt soared of $46 billion in the last quarter – a jump of 13% over the previous year which marks the largest increase in more than 20 years.
- Americans opened 233 million new accounts in the April-June period, the most since 2008.
By the numbers: Household debt now stands at over $16 trillion. Credit card balances account for $890 billion.
- Credit cards remain historically low, but they are rising — especially among those in poorer ZIP codes, according to the New York Fed.
What they say : “The recent increase in delinquency in some households suggests that many communities or individuals are experiencing the economy differently,” researchers said. wrote.
To note: Credit card balances may be growing rapidly, but they remain below the pre-pandemic level of $930 billion.
- And with the rise in new accounts comes more advertising from issuers to entice people to open said accounts.
- Capital One and Discover, for example, both saw their marketing costs jump nearly 50% from a year ago, largely due to their efforts to increase credit card signups, according to the Wall Street Journal. reported today.