U.S. consumer credit card debt surpasses $1 trillion for first time

U.S. credit card debt hit $1 trillion for the first time toward the end of July, but its share of U.S. gross domestic product is still lower than it was in 2010, or at the onset of the pandemic.

Why it matters: The rise reflects a number of factors, including rising consumer confidence and spending power amid cooling inflation.

• Also playing a role: the continued strength of excess savings built up during the pandemic, which are now being deployed on travel and experiences.

State of play: Credit card balances in the U.S. in total increased by $45 billion in the second quarter, up 4.6% from the first quarter, and now stand at $1.03 trillion, data from the Federal Reserve Bank of New York revealed on Tuesday.

• Total balances on credit cards and other revolving accounts have climbed since the Federal Reserve started to raise interest rates, but the economy has not only remained resilient — it's grown stronger than anticipated.
• Businesses, and the government, are spending on projects including infrastructure and manufacturing plants.
• Moderating inflation and the still-strong jobs market have boosted confidence among consumers, who hold an estimated $4.1 trillion more in overall bank deposits than before COVID struck.

Zoom in: Americans have ramped up spending on travel, dining and experiences in the second quarter, recent reports from American Express and Mastercard show.

Yes, but: Credit card debt is just 6% of the total deposits households have in the bank, which is around the lowest percentage in 20 years.

• It suggests that, at least for now, consumers have enough disposable cash to service their debts.

Zoom out: There are 70 million more credit card accounts open now than pre-pandemic in 2019, according to Fed researchers.

• Roughly 69% of Americans had a credit card account in the second quarter of 2023, up from 65% in December of 2019.
• About a decade ago as of December 2013, 59% had a credit card account.

What they're saying: "American consumers have so far withstood the economic difficulties of the pandemic and post-pandemic periods with resilience," Fed researchers write on the Liberty Street Economics blog.

• "However, rising balances may present challenges for some borrowers, and the resumption of student loan payments this fall may add additional financial strain for many student loan borrowers."

What to watch: The impact of tightening lending standards on credit card issuances to consumers with lower credit scores.

Editor's note: This story has been updated with details throughout.

Go deeper

• Personal spending kept climbing in June
• Listen to the Axios Today podcast, where host Niala Boodhoo and Hope King put the trillion-dollar credit card debt milestone in the context of savings.