Americans’ total credit card debt reached a record $930.6 billion in the fourth quarter, up 18.5% from a year earlier, according to TransUnion.
Inflation is driving people to put everyday expenses on their credit card or to turn to subprime and personal loans, says Michele Raneri, vice president of U.S. research and consulting at TransUnion.
“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 by the Federal Reserve,” Raneri says
Until inflation subsides to its historic norm of 2%, “We fully expect consumers to continue to look to credit products such as credit cards, HELOCs (home equity lines of credit) and unsecured personal loans to help make ends meet.”
Americans carry an average balance of $5,805 on their credit cards, most of which charge interest of nearly 20%.
Generation Z has been hitting the plastic the most, with the number of the credit cards they hold rising 19% in the past year and their balances ballooning 64%, says Paul Siegried, SVP and credit card business leader at TransUnion.
Overall, 2.26% of credit card holders were delinquent on payments in the fourth quarter of 2022, up from 1.48% a year earlier.
“The increases in delinquencies is something to watch,” Raneri says. “If unemployment goes up, and we see a spike in delinquencies, then that indicates a longer-term problem.”
Americans opened up 202 million new credit accounts in the fourth quarter of 2022, bringing the total number of credit cards held by the 332 million people living in the United States to 518.4 million.
Bankrate estimates that, at a 20% interest rate, a person paying just the minimum on a $5,805 credit card balance and not making any additional purchases would pay an additional $8,213 in interest over 17 years before bringing their balance down to zero.
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