As financial pressures increase, more and more Americans are turning to credit card borrowing, according to the latest reports.
The latest household debt report released by the Federal Reserve Bank of New York on Tuesday showed that in the third quarter, U.S. credit card balances increased by a total of $22 billion to a record $1.29 trillion, representing a year-on-year increase of 4.2%.
The report also shows that between July and September, total household debt, including mortgage loans, car loans, and student loans, increased by $334 billion to reach a record $19.1 trillion.
Fed researchers said in a teleconference on Tuesday: "Overall debt has been growing. This indeed reflects financial difficulties outside the system."
"One of the most expensive ways to borrow money"
Another quarterly credit industry insight report from TransUnion shows that the average consumer credit card balance is currently $6,678, an increase of 2.4% year-on-year. The number of people holding credit cards has risen from 174.8 million to 178 million, an increase of 2%.
One of the reasons why consumers often turn to credit cards is that they are easier to obtain than other types of loans – although data from LendingTree shows that the average interest rate on new credit card offers is around 24%. The annualized interest rate on credit cards can vary depending on the type of card, the issuing institution, and the borrower's credit status.
TransUnion Charlie Wise, Senior Vice President of Global Research and Consulting at Charlie Wise, stated: "Credit cards are still one of the most expensive ways to borrow money."
New York Fed researchers stated in a accompanying blog post that over time, an increasing number of new credit cards have been issued to borrowers with lower incomes and lower credit scores, and "these accounts now show higher levels of stress."
New York Fed researchers stated in a teleconference that in the years following credit card issuers' relaxation of lending standards during the COVID-19 pandemic, the delinquency rate rose.
The New York Fed stated, "Macroeconomic headwinds—mainly high inflation and rising borrowing costs—are squeezing consumers, and for low-income groups, the pace of inflation has surpassed wage growth."
At the same time, living costs continue to rise, and Americans are spending more on necessities such as food, groceries, and gasoline.
Intractable inflation has persisted for many years now, putting many families under financial strain. On Tuesday, the U.S. Bureau of Labor Statistics also reported that the cost of goods and services rose again in October by more than expected.
Ted Rosman, the chief consumer finance analyst at the non-profit credit advisory firm Money Management International, stated: "Higher prices and higher interest rates are putting more people into debt."
He stated that after the pandemic, the balance continued to swell, and although the growth rate is now slowing down, "from a family financial perspective, it has already caused significant damage."
At the time these reports were released, the Democratic Party achieved strong results in the mid-term elections. Kyle Moore, the chief economist at the non-partisan think tank Century Foundation ( The Century Foundation ), stated that many voters expressed dissatisfaction with the U.S. economy.
Moor said when referring to election day, "The main theme behind many of the results on Tuesday is that people realize that the U.S. economy is letting American families down."
