A recent analysis raises concerns about the wellbeing of American debtors. According to the Federal Reserve Bank of New York, the amount of consumer credit card debt in the United States has increased to around $1 trillion.
The survey indicated that credit card balances rose by more than $60 billion for the three months ending in December, bringing the total amount of credit card debt in the United States to an all-time high of $986 billion.
Visit here:MyMilestoneCard
With interest rates on credit card debt rising at the same time that credit card balances are skyrocketing, household budgets are being squeezed as high inflation depletes the savings that many people built up during the pandemic.
According to WalletHub, the average credit card interest rate provided in the U.S. throughout the final three months of 2022 was 21.6%, up from around 18% the year before.
The Federal Reserve increased interest rates aggressively over time, which is what led to the recent increase in credit card rates.
According to data from the New York Fed, overall household debt climbed for the final three months of 2022, rising 2.4% to around $17 trillion.
Despite a strong job market and the lowest unemployment rate in more than 50 years, the record credit card debt raises concerns about the well-being of American borrowers, according to Wilbert van der Klaauw, an economic research consultant at the New York Fed.
Van der Klaauw stated that despite historically low unemployment, some borrowers' ability to repay their obligations may be put to the test by persistently high prices and rising interest rates.
According to research conducted by TransUnion, the typical credit card user had a balance of $5,805 throughout the final three months of 2022. The amount represented an 11% increase over the prior year.
In an effort to reduce price increases by slowing the economy and stifling demand, the Fed increased borrowing costs earlier this month.
While having drastically decreased from its summer peak, inflation is still higher than the Federal Reserve's goal rate of 2%.
Retail sales soared in January, according to government data released on Wednesday, despite certain signs that suggest weakening consumer momentum.
Retail sales in the United States increased 3% in January compared to a month earlier, beating the 2% increase predicted by Bloomberg's survey of economists.
Declining retail sales put a damper on the generally robust holiday shopping season.
In January, consumer price growth was 6.4% higher than it was a year before, a modest down but still high.
Ted Rossman, a senior analyst at Bankrate.com who specialises on the credit card sector, recently told ABC News that many consumers might not have enough revenue coming in to pay daily spending. "Unfortunately, that leads to a very chronic debt cycle."
Total US Household Debt Also At Record High
According to the Fed's most recent Quarterly Report on Household Debt and Credit, total US household debt reached a record $16.9 trillion during the fourth quarter, an increase of $394 billion, or 2.4%, from the previous three-month period.
Although mortgages account for the majority of the debt, the survey revealed that not only are credit card balances rising to record heights, but delinquencies are also increasing.
According to New York Fed data dating back to 1999, credit card balances climbed by over 6.6% to $986 billion during the quarter, the largest quarterly growth ever. According to the data, credit card balances increased 15.2% from one year ago.
American Credit Card Getty
For the past 11 months, the Federal Reserve has raised interest rates significantly in an effort to counteract excessive inflation.
The housing market has suffered as a result of rising interest rates. Mortgage originations decreased to 2019 levels during the fourth quarter of last year, according to a New York Fed study.
Although the labour market has been historically robust, consumers are still spending despite historically high inflation and rising interest rates.
Triple Trouble For Credit Card Users
According to a CNN article, Ted Rossman, senior industry analyst for Bankrate, stated in a statement that "it's triple disaster for credit card users."
More people are carrying credit card debt, balances are rising, and interest rates are rising. Also, Americans are finding it harder to make payments in this atmosphere of rising inflation and interest rates.
Nearly all debt types had an increase in the proportion of current debt that became late, with credit cards and auto loans reporting default disclosure rates of 0.6 and 0.4 percentage points, respectively.
Researchers from the New York Fed estimate that 18.3 million borrowers had credit card debt as at the end of 2022. Compared to 15.8 million by the end of 2019, this number.
According to New York Fed researchers, younger borrowers—those in their 20s and 30s—have trouble making their credit card and vehicle loan payments.
The survey indicated that credit card balances rose by more than $60 billion for the three months ending in December, bringing the total amount of credit card debt in the United States to an all-time high of $986 billion.
With interest rates on credit card debt rising at the same time that credit card balances are skyrocketing, household budgets are being squeezed as high inflation depletes the savings that many people built up during the pandemic.
According to WalletHub, the average credit card interest rate provided in the U.S. throughout the final three months of 2022 was 21.6%, up from around 18% the year before. The Federal Reserve increased interest rates aggressively over time, which is what led to the recent increase in credit card rates.
According to data from the New York Fed, overall household debt climbed for the final three months of 2022, rising 2.4% to around $17 trillion.
Despite a strong job market and the lowest unemployment rate in more than 50 years, the record credit card debt raises concerns about the well-being of American borrowers, according to Wilbert van der Klaauw, an economic research consultant at the New York Fed.
Van der Klaauw stated that despite historically low unemployment, some borrowers' ability to repay their obligations may be put to the test by persistently high prices and rising interest rates.
According to research conducted by TransUnion, the typical credit card user had a balance of $5,805 throughout the final three months of 2022. The amount represented an 11% increase over the prior year.
In an effort to reduce price increases by slowing the economy and stifling demand, the Fed increased borrowing costs earlier this month.
While having drastically decreased from its summer peak, inflation is still higher than the Federal Reserve's goal rate of 2%.
Retail sales soared in January, according to government data released on Wednesday, despite certain signs that suggest weakening consumer momentum. Retail sales in the United States increased 3% in January compared to a month earlier, beating the 2% increase predicted by Bloomberg's survey of economists.
Declining retail sales put a damper on the generally robust holiday shopping season.
In January, consumer price growth was 6.4% higher than it was a year before, a modest down but still high.
Ted Rossman, a senior analyst at Bankrate.com who specialises on the credit card sector, recently told ABC News that many consumers might not have enough revenue coming in to pay daily spending. "Unfortunately, that leads to a very chronic debt cycle."
Comments
Post a Comment