Science & Technology

US Credit Card Debt Reaches $1 Trillion, While Delinquency Rates Rise

The New York Federal Reserve estimated that US credit card debt reached nearly $1 trillion in the fourth quarter of 2022, growing by a record $130 billion annually. The rise in delinquencies and charge-offs makes credit card issuers prepare for the worst

US credit card debt

Image: pixabay

According to the data from the New York Federal Reserve, US national credit card debt in the last quarter of 2022 increased by $61 billion from Q3 2022 and by a record $130 billion annually.

The biggest quarterly surge and the highest total since the New York Fed began tracking in 1999 brought the number to almost $1 trillion – $986 billion, to be exact.

Credit cardholders in Connecticut have the highest average credit card debt of any state, according to LendingTree data, while those in Kentucky have the lowest.

The main reasons for the abnormal increase are:

  • unabating inflation;
  • higher interest rates which make credit card balances more expensive;
  • revolving balances that slightly rose last year;
  • seasonal holiday shopping that forced customers to turn to credit options in Q4.

The average APR for all current credit card accounts in the US jumped to 19.07% in the fourth quarter, up from 16.27% a quarter earlier. Meanwhile, APRs for cards accruing interest surged to 20.40%, up from 18.43% in Q3 2022.

Besides the rising debt, credit card issuers have also recorded increases in delinquency rates. Bank of America, JPMorgan Chase and Discover noticed about a 1% rise in loans that were delinquent by 30 or more days. Similar growth was observed in net principal charge-off rates.

Therefore, leading banks and card issuers tightened their lending standards and set aside more money reserves to cover potential loan losses.

The abovementioned tendencies haven’t exceeded pre-pandemic levels. However, it might be an early sign of the ongoing financial strain faced by US consumers.

Nina Bobro

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Nina is passionate about financial technologies and environmental issues, reporting on the industry news and the most exciting projects that build their offerings around the intersection of fintech and sustainability.