U.S. credit card debt has reached a record $1.14 trillion, according to the Federal Reserve Bank of New York. This is $27 billion more than the $1.13 trillion reported for the second quarter of 2024.
This increase in debt comes as worries about an economic downturn grow, driven by rising unemployment and high costs for food, housing, and cars. Many Americans are using credit cards more, with 60% relying on them to buy groceries in 2023, according to the Urban Institute.
More people are also falling behind on their credit card payments. About 7.18% of cardholders were delinquent in the second quarter, up from 5% in the previous quarter.
Ted Rossman from Bankrate noted that while Americans reduced their credit card debt in 2020 with stimulus funds, balances started rising sharply in 2021 due to increased spending and high inflation and interest rates.
Mortgage and auto loan debts also grew, with mortgages up by $77 billion and auto loans up by $10 billion. Total consumer debt has reached $17.8 trillion.
Interest rates on credit cards have also hit a record high of 24.84%, according to LendingTree. However, there may be relief if the Federal Reserve lowers its benchmark rate in September. Lower rates could lead to decreased credit card interest rates, providing some relief to borrowers.