Record $1.17 trillion in credit card debt, according to New York Fed research

• The Federal Reserve Bank of New York has released a report stating that Americans collectively owe a record $1.17 trillion on their credit cards.
• The New York Fed researchers stated that the recent improvement in credit card delinquency rates implies that "manageable debt burdens remain."

The Federal Reserve Bank of New York has reported that Americans' total credit card debt has reached a record $1.17 trillion.

In the third quarter of 2024, credit card balances increased by $24 billion, resulting in an 8.1% year-over-year increase.

The New York Fed found that credit card delinquency rates improved, with 8.8% of balances transitioning to delinquency over the last year, compared to 9.1% in the previous quarter. This change could suggest that rising debt burdens remain manageable, according to the researchers.

The researchers stated that household balance sheets appear to be in good shape overall.

Despite high borrowing costs, consumer spending remains strong, and credit card balances have rebounded since the pandemic as households spent down their excess savings.

A separate quarterly credit industry insights report from TransUnion found that growth in credit card balances has slowed.

TransUnion found that the average balance per consumer increased by only 4.8% year over year, which is significantly lower than the 11.2% increase the previous year and the 12.4% increase the year before that.

Credit card users are paying off last year's holiday debt, while holiday shoppers plan to spend more and take on debt. In 5 cardholders, a credit card has been maxed out or nearly reached its limit.

Achieve survey found that 42% of Americans reported no change in their total debt, while 28% said their debt has increased in the past three months.

In October, Achieve polled 2,000 adults with one or more kinds of consumer debt and found that most attributed the increase in their debt to the ongoing struggle to make ends meet. Some cited general overspending, while others blamed a lost job or reduced wages.

Brad Stroh, Achieve's co-CEO and co-founder, stated that while unemployment is low and wages have increased, these macroeconomic conditions are not felt equally among all population segments, particularly among consumers residing in areas where inflation has the greatest impact.

Credit card rates still top 20%

Borrowing money using credit cards has become one of the most expensive options available.

The Federal Reserve's 11 interest rate hikes have caused the average credit card rate to rise above 20%, which is close to an all-time high, and has disproportionately affected lower-income households who were already struggling to cover price increases.

Despite the Fed lowering its benchmark, the average credit card rate remains unchanged.

If interest rates on variable rate debt, such as credit cards, decrease, it will undoubtedly benefit those who have such debt, according to researchers from the New York Fed.

"The interest rate is less important than the borrowing amount," they added.