US Credit Card Debt Soars Past $1 Trillion Mark

Outstanding revolving credit card debt owed by U.S. consumers has topped $1 trillion for the first time ever. The record debt level reflects surging inflation driving higher costs paired with changing spending habits post-pandemic.

According to Federal Reserve data, total revolving credit card balances rose to $1 trillion in the last week of July. The towering debt number alarmed economists and comes amidst rising concerns over a potential recession.

US Credit Card Debt Soars Past $1 Trillion Mark
US Credit Card Debt Soars Past $1 Trillion Mark. Image by mrsiraphol on Freepik

With household budgets squeezed by high prices, consumers have increasingly relied on credit cards to maintain their spending levels. At the same time, pandemic-era government stimulus has been exhausted for many lower-income households.

This has forced consumers to lean more heavily on high-interest credit card financing versus pay-down balances. However, the debt burden compounds the inflationary pressures on household finances.

Credit Card Interest Rates All-Time High Since 1985

The Fed has been aggressively hiking interest rates to tamp down inflation, but this has also raised borrowing costs on any credit card variable rate plans. The average credit card interest rate now sits at around 20.53% the highest level since 1985.

Higher interest payments divert income from other spending or saving. And more consumers struggling with large credit card balances raises risks of delinquencies and bank write-offs.

While credit card lending standards have remained largely disciplined, some analysts warn the spike in debt is a worrisome sign of consumers’ dwindling resilience. Households already face falling real wage growth.

If the economy enters recession, mass job losses could quickly turn the ballooning credit card debt into a wider economic strain. However, others believe most borrowers remain in solid shape to service debts for now.

Either way, the unprecedented $1 trillion credit card debt milestone highlights the precarious balancing act facing many consumers as high inflation endures. It also poses potential threats to wider financial stability.

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