According to recent data released by the Federal Reserve Bank of New York has revealed that credit card balances in the United States have surpassed the significant milestone of $1 trillion. This surge in credit card debt suggests a growing sense of economic confidence among individuals, leading to increased credit card usage for essential purchases.

However, throughout the second quarter of 2023 (April to June), credit card debt surged by $45 billion, totaling a noteworthy $1.03 trillion. This rise underscores both heightened consumer spending and the impact of inflation, according to researchers.

Conversely, the number of individuals falling behind on their credit card payments has reached its highest average in 11 years. Nevertheless, experts from the New York Fed have observed gradual improvements in recent months, indicating a recovery towards pre-pandemic conditions.

In a corresponding blog post, New York Fed researchers emphasized that despite various challenges faced by American consumers, such as inflation and interest rate hikes, widespread financial distress remains limited.

While the growth in credit card balances may pose challenges for specific borrowers, and potential pressure for student loan repayments looms with the upcoming autumn season, researchers noted a promising trend of household credit stabilizing at pre-pandemic levels, albeit with higher nominal balances.

Collectively, credit card holders currently possess $3.6 trillion in additional available credit. Another report from the US Federal Reserve disclosed that credit card interest rates reached an all-time high of 22.2 percent in May. Amid the pandemic, over 70 million new credit card accounts have been opened.

Despite a return to pre-COVID-19 levels in terms of Americans falling behind on their payments, concerns linger due to the extensive use of credit cards. Furthermore, mortgage loans witnessed substantial growth, increasing by about $393 billion during the April to June period, notably exceeding the previous three months' total of around $324 billion.

The automobile industry also experienced a notable rise, with outstanding car loans increasing by $20 billion in the second quarter, bringing the total to approximately $1.58 trillion. Additionally, there was an 11 percent surge in individuals borrowing money for car purchases, totaling $179 billion.

Image source: NY Times