Balance: Consumers did something unusual in Q1, they didn't pay down their credit card debt
WE O U $17T
The New York Fed recently released its first-quarter report on household debt, revealing that American households now owe someone a staggering $17 trillion.
The majority of that is tied up in home mortgages, with the remainder split across student loans, car loans and credit cards — with the latter, and smallest of those 3 categories, particularly striking.
Credit card debt remained at a record level of $986 billion, defying the usual trend of post-holiday debt reduction. Indeed, this is the first time in over two decades that credit card balances haven't decreased in the first quarter — a period when many cut back on spending after the holiday period of October-December.
All told, credit card debt rose 17% in the last 12 months, a potential sign that consumers are turning to credit cards to cope with mounting daily expenses as inflation continues to bite. Another concern are the rising delinquency rates, with ~4.6% of credit card debt transitioning into "serious delinquency" — where debt remains unpaid for 90+ days — up from just 3% during the same period last year.
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This current situation stands in contrast to the pandemic, when US consumers, buoyed by stimulus checks and lockdown savings, managed to pay off $160bn of credit card debt between the end of 2019 and March 2021.
