WE O U $17T
The New York Fed recently released its first-quarter report on household debt, revealing that American households now owe someone a staggering $17 trillion.
The majority of that is tied up in home mortgages, with the remainder split across student loans, car loans and credit cards — with the latter, and smallest of those 3 categories, particularly striking.
Credit card debt remained at a record level of $986 billion, defying the usual trend of post-holiday debt reduction. Indeed, this is the first time in over two decades that credit card balances haven't decreased in the first quarter — a period when many cut back on spending after the holiday period of October-December.
All told, credit card debt rose 17% in the last 12 months, a potential sign that consumers are turning to credit cards to cope with mounting daily expenses as inflation continues to bite. Another concern are the rising delinquency rates, with ~4.6% of credit card debt transitioning into "serious delinquency" — where debt remains unpaid for 90+ days — up from just 3% during the same period last year.
Save to spend
This current situation stands in contrast to the pandemic, when US consumers, buoyed by stimulus checks and lockdown savings, managed to pay off $160bn of credit card debt between the end of 2019 and March 2021.
