US Credit Card Debt Hits Record High Amid Rising Prices and Interest Rates
Americans continue to pile up record levels of credit card debt, with the latest report from TransUnion showing that consumer credit card debt soared to a staggering $930.6 billion in the fourth quarter of 2022. This marks an 18.5% increase from the same period one year ago, accompanied by an average balance of $5,805. This debt accumulation can be attributed to the rising prices of everyday necessities and the interest rate hikes implemented by the Federal Reserve.
Michele Raneri, vice president of US research and consulting at TransUnion, remarked that “whether it’s shopping for a new car or buying eggs in the grocery store, consumers continue to be impacted in ways big and small by both high inflation and the interest rate hikes implemented by the Federal Reserve.”
The Federal Reserve data released Tuesday shows that US consumer credit for December was $11.56 billion, much less than the $25 billion expected. However, 202 million new credit accounts were opened in the fourth quarter, led by Generation Z, or adults ages 18 to 25. This brought the total number of credit cards held by the US population to 518.4 million.
As the Federal Reserve continues to raise the federal funds rate, variable credit card APRs increases will follow. Currently, average credit card rates are already over 19% APR and nearing 20%, according to Bankrate. At this rate, if a consumer only makes minimum payments on their $5,805 balance, it would take more than 17 years to pay off the debt and cost more than $8,213 in interest.
Revolving credit, like credit cards, increased at a 7.3% annual rate in December, the lowest monthly increase since the summer of 2021. Auto and student loans, known as non-revolving credit, rose at a 1.5% pace, the smallest increase since the early stages of the pandemic in 2020.
Consumers must be mindful of their debt burden and consider options such as a 0% introductory balance transfer card, personal loan or other debt repayment strategy if they cannot afford their payments. It is also beneficial to pay more than the minimum credit card payment to reduce the amount of interest paid.
Overall, the data shows that US consumers are struggling to keep up with rising prices and interest rates, leading to a record amount of credit card debt.
0. “US Credit Card Debt Jumps 18.5% to $930.6 Billion” Newsmax, 3 Feb. 2023, https://www.newsmax.com/finance/streettalk/credit-card-debt-interest-rates-inflation/2023/02/03/id/1107223/
1. “Americans progressively convert to credit cards to deal with…” MENAFN.COM, 6 Feb. 2023, https://menafn.com/1105528722/Americans-progressively-convert-to-credit-cards-to-deal-with-peak-inflation
2. “Americans are becoming ‘reluctant’ to make larger purchases, new Fed report shows” CNN, 7 Feb. 2023, https://www.cnn.com/2023/02/07/economy/consumer-credit-report-december/index.html
3. “What Is the Average Credit Card Debt in the US?” CNET, 3 Feb. 2023, https://www.cnet.com/personal-finance/credit-cards/average-american-credit-card-debt
4. “U.S. consumer credit grows at slowest pace in two years in sign of economic worries” msnNOW, 7 Feb. 2023, https://www.msn.com/en-us/money/markets/consumer-credit-grows-at-slowest-pace-in-two-years-in-sign-of-economic-worries/ar-AA17dnVP