U.S. credit card debt is approaching the historic $1 trillion mark as total household debt notched a record high in the first quarter of this year.
Total credit card debt stood at $986 billion in the first quarter, the Federal Reserve Bank of New York reported Monday, more than 17% higher than a year ago despite typically tumbling in the first quarter — the largest year-over-year increase in the 20-year history of the dataset. The country’s total household debt balance crossed the $17 trillion mark for the first time in history.
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In recent years, the country’s overall credit card balance has typically fallen about 2% from the fourth quarter to the first quarter, which is why debt remaining flat at $986 billion in the first quarter is notable, New York Fed researchers said during a Monday morning call with reporters. The first quarter marked the first time that balances didn’t decrease during that period since the New York Fed began tracking the figures in 2003. The researchers said that if the data were seasonally adjusted, they might have shown an increase.
That is because people usually pay back the loans that they took out during the holiday season during the first quarter, which runs from January through March. The numbers show that consumers are having a tougher time paying those off in the first three months than in past seasons.
One reason for the phenomenon could be inflation, researchers said. For instance, if a consumer is using a credit card to purchase holiday gifts that cost more than the year before, that could affect how that consumer’s balance will evolve over the following months.
“High inflation is certainly contributing to Americans’ high credit card balances, along with record-high interest rates (the average credit card charges 20.33%, an all-time high),” said Ted Rossman, senior industry analyst at Bankrate. “We’re seeing more people carrying credit card debt, too, often to finance day-to-day essentials.”
The number of credit card accounts also rose from the fourth quarter to the first quarter of this year, increasing a notable 1.5%. The number of accounts has increased by 6.7% over the past year to about 573 million.
Researchers noted that there was some tightening during the initial period of the pandemic and added that borrowers with lower credit scores aren’t seeing very high limits. The big expansion, when looking at the average per borrower, is among the most prime borrowers, according to the Fed.
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“Credit card delinquencies have been rising along with balances, rates, and the percentage of cardholders carrying debt from month to month,” Rossman said. “In the months to come, we’ll be watching closely for further signs of deterioration, along with a potential rise in the unemployment rate.”
Overall household debt grew by about $148 billion, or nearly 1%, from the fourth quarter and has increased by a whopping $2.9 trillion since the end of 2019.