Aug 2, 2022 - Economy

Credit card balances grow at fastest pace in decades

Open credit card accounts
Data: Federal Reserve Bank of New York; Chart: Skye Witley 

Credit card balances are ballooning at the quickest pace in decades, reflecting higher prices and more open accounts than ever before.

Why it matters: The debt will get costlier for borrowers to carry as the Fed raises interest rates quickly to tamp down scorching hot inflation. There are early signs lower-income consumers are starting to fall behind on payments.

Two fresh stats — courtesy of the New York Fed — tell the story:

  • Credit card debt surged by $46 billion last quarter — a 13% jump from the prior year that marks the biggest increase in over 20 years.
  • Americans opened 233 million new accounts in the April-June period, the most since 2008.

By the numbers: Household debt now totals more than $16 trillion. Credit card balances make up $890 billion of that.

  • Credit cards remain historically low, but they are rising — particularly among those in the poorest zip codes, according to the New York Fed.

What they're saying: "The recent uptick in delinquencies in some households suggests that many communities or individuals are experiencing the economy differently," researchers wrote.

Worth noting: Credit card balances may be rising quickly, but they remain below the pre-pandemic level of $930 billion.

  • And the uptick in new accounts comes alongside more advertising on the part of issuers to get people to open said accounts.
  • Capital One and Discover, for instance, both saw marketing costs jump nearly 50% from a year ago, largely because of their efforts to increase credit card sign-ups, the Wall Street Journal reported today.
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