Americans are now holding more household debt than ever before. According to a report from the New York Fed, U.S. credit card debt is soaring and touched a high of $1.14 trillion this quarter of 2024.
Apart from household and lifestyle debt, credit card transactions also include spending on student loans, mortgages, and home equity revolving debt. Around 4.9% of customers also have a third-party collection account on their credit.
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U.S. Credit Card Debt Could Rise Further As Christmas Season Nears
The average credit card spending has increased by $109 billion during the second quarter of 2024. That’s an increase of 0.6% in debt from Q1 of 2024. “Aggregate household debt balances increased by $109 billion in the second quarter of 2024, a 0.6% rise from 2024Q1. Balances now stand at $17.80 trillion and have increased by $3.7 trillion since the end of 2019, just before the pandemic recession,” say the Feds.
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Impact on Consumer Spending
The credit card debt has surged despite Americans meeting their job requirements. “What you’re seeing is they’re spending at a rate of growth of this year over last year, for July and August so far, about 3%,” said Bank of America CEO John Moynihan to Fox News.
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Federal Reserve’s Role
The Federal Reserve has to be careful and position interest rates so the economy and consumerism do not slow down. They must also balance delinquency transition rates for credit card non-payments to safeguard the economy. That includes making customers opt for auto payments, among various other methods.
Potential Risks
A higher credit card debt load goes hand in hand only when the economy is booming. If a recession or a slowdown hits the US economy, delinquency and non-payments could hit the roof, leading to banks accumulating massive debt.
Future Outlook
Consumer spending will rise further as America enters the Christmas season next quarter. It is expected to climb to another high by the end of this financial year.