US credit card debt hits record high as delinquencies and borrowing rise

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The US credit card debt has reached a new record high of $1.08 trillion in the third quarter of 2023, according to the latest data from the Federal Reserve Bank of New York. This represents a 5.8% increase from the same period last year, and a $154 billion annual increase, the largest since the New York Fed began tracking the data in 1999.

The surge in credit card debt reflects the strong consumer spending and real GDP growth in the third quarter, which was 4.9%, the fastest pace in two years. However, it also signals the growing financial stress and challenges faced by many Americans, who may be struggling to cope with the inflation, supply chain disruptions, and higher borrowing costs caused by the pandemic.

The New York Fed report also showed that the delinquency rate on credit card loans, which measures the percentage of borrowers who are late on their payments, rose to 2.74% in the third quarter, the highest level since 2013. The report said that the increases in credit card delinquency were most pronounced for those aged between 30 and 39, and for those with higher total balances.

·         The rising credit card debt and delinquency could have negative impacts on the economy, such as:

·         Reducing consumer confidence and spending, as more people struggle to pay off their debts and face higher interest rates and fees.

·         Increasing the risk of default and bankruptcy for borrowers, which could hurt their credit scores and limit their access to future credit.

·         Affecting the profitability and stability of lenders, especially banks and credit card companies, which could face higher losses and lower revenues from delinquent accounts.

·         Weakening the overall financial system and increasing the vulnerability to shocks and crises, as credit card debt and delinquency are often indicators of broader economic stress and distress.

The New York Fed report also showed that the total consumer borrowing rose by $9.1 billion in September, reflecting modest growth in non-revolving debt, such as auto and student loans. However, the report noted that the student loan debt declined by nearly $28 billion in the third quarter, as the Department of Education started to forgive $39 billion in student-loan debt for more than 800,000 borrowers.

Both the New York Fed and the Federal Reserve Board data indicate that the US consumers are facing mixed challenges and opportunities in managing their debt levels, while also stimulating the economic recovery from the pandemic. The government and the central bank may need to adopt more policies and regulations to support the borrowers and the lenders, and to prevent the credit card debt and delinquency from spiraling out of control.


Source: Business Times, CNN Business, Bloomberg


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