Money Research Collective’s editorial team solely created this content. Opinions are their own, but compensation and in-depth research determine where and how companies may appear. Many featured companies advertise with us. How we make money.
America’s Credit Card Crisis: Here’s How High the Average Balance Is Now
By Pete Grieve MONEY RESEARCH COLLECTIVE
The rate of credit card delinquencies and number of Americans carrying a balance are both on the rise.
Credit cardholders have racked up an additional $1,000 of debt on average in the last two years, a sign that Americans are turning to plastic to support their spending while inflation is high.
The average credit card balance per consumer increased to $6,329 in the second quarter, an increase from $5,270 two years ago, according to a new report from TransUnion, one of the three major credit bureaus.
Credit products, including credit cards, “continue to serve to bridge the financial gaps that may exist in many household budgets,” according to the report. TransUnion cites high interest rates and inflation since 2021 as two of the main pressures credit cardholders have been facing.
“Just about everything consumers purchase has increased in price,” the report said. “While the rate of inflation has slowed, balances continue to rise.”
Why credit card balances are rising
Some consumers are opening more credit cards, with the total number reaching 545 million in the second quarter. But that figure has only increased by 2.7% in a year, and credit card companies have tightened lending standards for riskier borrowers amid a rise in missed payments and delinquencies.
According to a separate New York Fed report earlier this week, about 9.1% of credit card balances became delinquent — or at least 30 days overdue — in the past year. That’s an increase from a rate of 7.2% one year ago. Cardholders in serious delinquency (overdue for 90 days or more ) is also up, from 5.1% a year ago to 7.2% now.
The growth in credit card debt results from more cardholders carrying balances, while borrowers are also letting their account balances grow.
The number of consumers carrying a balance was 170.1 million in the second quarter, an increase of nearly 3 million in a year.
“Higher-risk prime and below segments seem to be experiencing more significant inflationary pressures and as such, relying on their cards more, evident in increasing balances and higher utilization,” Paul Siegfried, a senior vice president at TransUnion, said in the report.
Total card balances increased to $1.05 trillion in the second quarter, up 8.6% year over year, according to the report. On the bright side, that rate of increase — while still high — is down from the previous quarter when balances were up 11.3% over the year-ago level.
More from Money:
Best Credit Cards of August 2024
Credit Card Delinquencies Reach Highest Level in Over a Decade
Here’s the No. 1 Barrier Blocking Parents From Saving More Money for College
Pete Grieve is a New York-based reporter who covers personal finance news. At Money, Pete covers trending stories that affect Americans’ wallets on topics including car buying, insurance, housing, credit cards, retirement and taxes. He studied political science and photography at the University of Chicago, where he was editor-in-chief of The Chicago Maroon. Pete began his career as a professional journalist in 2019. Prior to joining Money, he was a health reporter for Spectrum News in Ohio, where he wrote digital stories and appeared on TV to provide coverage to a statewide audience. He has also written for the San Francisco Chronicle, the Chicago Sun-Times and CNN Politics. Pete received extensive journalism training through Report for America, a nonprofit organization that places reporters in newsrooms to cover underreported issues and communities, and he attended the annual Investigative Reporters and Editors conference in 2021. Pete has discussed his reporting in interviews with outlets including the Columbia Journalism Review and WBEZ (Chicago's NPR station). He’s been a panelist at the Chicago Headline Club’s FOIA Fest and he received the Institute on Political Journalism’s $2,500 Award for Excellence in Collegiate Reporting in 2017. An essay he wrote for Grey City magazine was published in a 2020 book, Remembering J. Z. Smith: A Career and its Consequence.