US credit card balances breach $1 trillion-mark for the first time

Recent data from the Federal Reserve Bank of New York shows credit card balance has breached the $1 trillion-mark. The increase in credit card debt suggests that many people feel confident about the economy and are using credit cards to buy things they need.

During the second quarter (April to June 2023), credit card debt went up by $45 billion, reaching a total of $1.03 trillion, reflecting increasingconsumer spending as well as higher prices due to inflation, researchers said.

Meanwhile, the number of people who were late on their credit card payments washigher than it has been in 11 years, on an average. But when looking at the last few months, experts at the New York Fed noticedthat the situation seems to be getting better and getting closer to what it was before the pandemic.

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"Despite the many headwinds American consumers have faced over the last year—higher interest rates, post-pandemic inflationary pressures, and recent banking failures—there is little evidence of widespread financial distress for consumers," New York Fed researchers wrote in a blog accompanying the data release.

Concerns over growing credit balances amid recovery

Though growing balances may provide difficulties for certain borrowers, and student loan borrowers may be pressured once repayments begin this autumn, they stated that "household credit shows some early signs of stabilizing at pre-pandemic health, albeit with higher nominal balances."

Credit card holders have, in aggregate, $3.6 trillion in additional credit availability. A different report from the US Federal Reserve said that in May, the interest rate for credit cards was the highest it has ever been, at 22.2 percent. Since the pandemic began, more than 70 million new credit card accounts have been opened.

Even though the percentage of Americans who are behind on their payments is back to where it was before COVID-19, people are still worried about what could happen because so many are using credit cards so much.

Mortgage loans went up a lot in the months from April to June. It was about $393 billion, which is a lot more than the last three months, when it was around $324 billion.

For buying cars, the amount of money people owe went up by $20 billion in the second quarter. It's now around $1.58 trillion. More people also started borrowing money to buy cars, which went up by about 11 percent to $179 billion.

(Inputs from Reuters)

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