Americans Are Opening More Credit Cards, and Adding Debt
Inflation has been at record-high levels this year, so Americans are turning to their credit cards again, to make ends meet.
Overall, credit card balances increased by 13% in the second quarter of 2022, the largest year-over-year jump in more than 20 years, according to a report from the Federal Reserve Bank of New York.
Total credit card debt now stands at $890 billion. But even with the record increase, that figure still stands below pre-pandemic numbers. Credit card debt saw a sharp decline in 2020 at the start of the pandemic.
The additional credit card debt this quarter is not only due to people using their credits more. There was also a total of 233 million new credit accounts in the quarter, another record for the last 14 years.
The report also shows an increase in total household debt in the second quarter of 2022, increasing by $312 billion (2%) to $16.15 trillion. Household debt has now surpassed figures from the end of 2019 ,the last pre-pandemic quarter, by about $2 trillion.
“The second quarter of 2022 showed robust increases in mortgage, auto loan, and credit card balances, driven in part by rising prices,” said Joelle Scally, Administrator of the Center for Microeconomic Data at the New York Fed. “While household balance sheets overall appear to be in a strong position, we are seeing rising delinquencies among subprime and low-income borrowers with rates approaching pre-pandemic levels.”
Current debt transitioning into delinquency increased modestly for all debt types but remains historically very low. The delinquency transition rate for credit cards, auto loans, and other debts increased by 0.5 percentage points.
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