Credit card debt in the United States climbed to $1.26 trillion during the second quarter of the year, narrowing the gap with the prior year’s record of $1.28 trillion, the Federal Reserve Bank of New York reported this week. The debt balance increased by $21 billion or 1.7% from the first quarter, indicating that American households carried elevated balances heading into the summer months.
Mortgage and student loan balances declined slightly during the period, while credit card and other consumer debt categories experienced growth. The share of total household debt belonging to accounts more than 90 days overdue had risen to 12.8% earlier this year from 7.6% in late 2022, marking levels not observed since the Great Recession. However, the overall portion of household debt held by delinquent accounts edged down to 4.7% of outstanding balances in the most recent quarter from 4.8% in the prior quarter.
Economists attributed the rising debt levels to sustained inflation pressures affecting household budgets. Lucia Dunn, professor emerita of economics at Ohio State University, noted that consumers are using credit cards to cover essential expenses including groceries, school supplies, baby formula, and other necessities as prices remain elevated compared to pre-conflict levels. She emphasized that carrying credit card balances amid economic hardship differs from traditional usage patterns and can create serious financial vulnerability during downturns, referencing the 2008 financial crisis as a cautionary example.
The Federal Reserve’s report also documented record auto loan origination during the second quarter, with consumers taking out $211 billion in new vehicle financing. The data underscores broader trends of increased household reliance on credit as consumers navigate persistent inflation and economic pressures.
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