A new survey suggests that credit card debt in the United States is on the rise.
According to new statistics released Thursday, May 16, by TransUnion, the average amount of debt per borrower reached $6,218 at the end of the first quarter, representing an 8.5% rise compared to the previous year. This means that the total amount of consumer credit card debt is $1.02 trillion.
People Continue Using Use Credit Cards Amid High Inflation and Interest Rates
The demand for credit remains robust despite the relatively high interest rates, according to TransUnion Senior Vice President Paul Siegfried, as reported by Fox Business. He said customers are trying to control their spending in the face of continuously rising inflation.
As a consequence of the continuing inflation issue, most families have seen an increase in their monthly costs. Despite a decline from its 9.1% high, the consumer price index is still far higher than it was before the pandemic. Inflation is about 18% higher now than it was in January 2021, before prices started to soar.
The alarming increase in both credit card use and debt is heightened by the fact that interest rates on these loans are skyrocketing.
These results follow recent statistics from the New York Federal Reserve that show more and more Americans are skipping payments on their monthly credit cards.
Credit Card Delinquency Rose 8.9% Annually in Q1
According to CNBC, the New York Fed found that delinquent credit card balances reached 8.9% on an annualized basis in the first quarter, surpassing levels seen before the pandemic.
Joelle Scally, a regional economic director at the New York Fed's Household and Public Policy Research Division, said a growing percentage of borrowers that have failed to make their credit card payments indicates that some families are experiencing increased financial difficulty.
Given the low unemployment rate, New York Fed analysts presented numerous ideas for why delinquencies increased so much.
One is that consumers may have spent their pandemic savings but are still spending heavily. Employment turnover may possibly explain the rise, too. On the other hand, some Americans lose their jobs and find lower-paying ones.
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