SUMMARY
- Record Surge: Credit card debt tops $1.03 trillion, a first in history, during the April-June period.
- Rising Delinquency: The rate of late payments climbs to 7.2%, the highest since 2012, yet within normal levels.
- Tightening Standards: Banks tighten credit standards, signaling caution amid other modest debt changes.
As summer approached, Americans found themselves relying more heavily on credit cards, marking a momentous occasion as total balances surged past $1 trillion for the first time in history, according to data from the New York Federal Reserve.
During the second quarter of the year, credit card debt ballooned by $45 billion, an increase of over 4%, reaching a staggering sum of $1.03 trillion. This figure, the highest in Fed data dating back to 2003, wasn’t the only area showing significant growth; total household debt also set a new record, inching up by $16 billion to $17.06 trillion.
This growth in credit card utilization wasn't without its hitches. As more people swiped their cards, delinquency rates followed suit. The number of accounts 30 or more days overdue increased to 7.2% in Q2, a notable jump from the previous quarter's 6.5%, though still within the bounds of what officials consider normal.
Joelle Scally of the New York Fed succinctly summarized the situation, noting a strong growth in credit card balances during the second quarter. But she also tempered concerns, stating that delinquency rates have returned to pre-pandemic levels. Fed researchers attributed the rise in balances to a mix of inflationary pressures and an uptick in overall consumption.
Meanwhile, the banking sector appears to be taking a more cautious stance, tightening credit standards as demand for new card issuances has ebbed. Other areas of debt saw only moderate changes. Mortgages, auto loans, and student loans experienced various shifts, but none quite as dramatic as the credit card industry's landmark surge.
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