Credit Card Debt Hits Record $1.29 Trillion as Households Feel the Squeeze

Credit card balances climbed by $22 billion in the July-to-September quarter, landing at a record $1.29 trillion, according to the Federal Reserve Bank of New York's household debt report out Tuesday. That's up 4.2% from a year earlier. Total household debt — mortgages, auto loans and student loans included — grew by $334 billion over the same stretch, hitting a record $19.1 trillion. On a press call, New York Fed researchers were blunt: the growth reflects financial hardship out there.

TransUnion's separate quarterly credit industry report shows the average balance per consumer now sits at $6,678, up 2.4% year over year. The number of cardholders rose 2%, reaching 178 million, up from 174.8 million. Borrowers keep swiping partly because cards are easier to get than other loans — even with the average interest rate on a new card offer around 24%, per LendingTree. Credit cards remain one of the most expensive ways to borrow, said TransUnion's Charlie Wise.

The New York Fed flagged a troubling shift in who's getting approved. A growing share of new cards has gone to borrowers with lower incomes and lower credit scores, and those accounts are now showing higher levels of distress, researchers wrote in a blog post. Issuers loosened lending standards during the pandemic, and delinquency rates climbed in the years that followed. The Fed pins the pressure on high inflation and rising borrowing costs, with inflation outpacing wage growth for low-income brackets.

The pain isn't letting up. Prices for goods and services rose more than expected again in October, the Bureau of Labor Statistics reported the same day, with groceries and gas eating into budgets. Higher prices and higher rates have pushed more people into debt, said Ted Rossman of the nonprofit credit counseling agency Money Management International. Balance growth is slowing, he added, but from a household finance standpoint, a lot of damage has been done.

The data lands right after Democrats' strong midterm showing, a race where the economy drove voter frustration, according to Kyle Moore, chief economist at the nonpartisan Century Foundation. The throughline connecting so many of Tuesday's outcomes, Moore said, was a recognition that the American economy is failing American families.