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