Living on credit: Americans' debts have exceeded a trillion dollars and continue to grow

Credit card delinquencies rose more than 50% in 2023, and total consumer debt increased to $17,5 trillion, reports CNBC.

Photo: IStock

Credit card debt in the United States increased by $50 billion in the fourth quarter of 2023.

With total debt at $1,13 trillion, credit card debt stood at 6,4% in the fourth quarter of 2023, according to the Federal Reserve Bank of New York (FRB). This is 59% more than at the end of 2022. This appears to be the highest credit card debt balance since at least 2003.

Delays on various loans

Delinquencies also increased for mortgage loans, car loans and other categories. Student loan delinquencies have dropped, as have home equity lines of credit. Overall, 1,42% of debt is 90 days or more past due, compared with just over 1% at the end of 2022.

On the subject: From April 1, USCIS will raise prices for immigration services: what will become more expensive and by how much

“Delinquency rates on credit cards and auto loans continue to exceed pre-pandemic levels,” said Wilbert van der Klaauw, economic research adviser at the New York Federal Reserve. “This signals increased financial stress, especially among young, low-income families.”

Although delinquency rates are rising, New York Fed researchers said overall debt is growing at about the same rate as before the COVID-19 pandemic began in March 2020.

Household debt increased by $212 billion in the fourth quarter, up 3,6% year over year. This brings the total to $17,5 trillion. Credit card debt jumped 14,5% compared to the same period in 2022. Auto loans in total grew to $1,61 trillion, up $12 billion quarterly and $55 billion year-on-year (up 3,5%).

Student loan debt, a concern of Washington lawmakers, has increased little during the pandemic. It currently stands at just over $1,6 trillion, up just 0,4% from last year. President Joe Biden has forgiven about $136,6 billion in student loan debt since taking office. The share of seriously overdue debt decreased to 0,8%.

Rising interest rates played a role

Borrowers have been hit by rising interest rates. From March 2022 to July 2023, the Federal Reserve raised the short-term borrowing rate by 5,25 percentage points, bringing the federal funds rate to its highest level in 23 years.

Since the central bank began tightening policy, the typical credit card rate has jumped from about 14,5% to 21,5%, according to the Fed.

“This is a trend to watch because it comes at a time when the economy is still growing,” noted Joseph LaVorgna, chief economist at SMBC Nikko Securities.

You may be interested in: top New York news, stories of our immigrants, and helpful tips about life in the Big Apple - read all this on ForumDaily New Y

“What happens if the economy slows and unemployment rises quickly? Delinquencies could increase sharply, which, in turn, will lead to a self-reinforcing credit crisis, LaVorgna explained. “In other words, a moderate recession could turn into a deep one.”

Fed researchers say rising rates likely played a role in delinquency rates. In the case of cars, for example, payouts changed little even after prices fell due to the premium rate structure.

Mortgage debt rose 2,8% in 2023, and the delinquency rate increased to 0,82%, up a quarter percentage point from the previous year.

Read also on ForumDaily:

A woman lived for 500 days in a cave in complete isolation: it affected her body worse than she expected

Detailed and realistic: AI wrote instructions for the destruction of humanity in a few seconds

You can write off up to $7430: How the Earned Income Tax Credit Works

Do you want more important and interesting news about life in the USA and immigration to America? — support us donate! Also subscribe to our page Facebook. Select the “Priority in display” option and read us first. Also, don't forget to subscribe to our РєР ° РЅР ° Р »РІ Telegram  and Instagram- there is a lot of interesting things there. And join thousands of readers ForumDaily New York — there you will find a lot of interesting and positive information about life in the metropolis.