US Credit Card Debt Holds at Record High of Nearly $1 Trillion

Credit cards are seen in an undated file photo. (Republica/Pixabay)

U.S. credit card balances failed to decline in the first three months of 2023 as Americans find themselves increasingly burdened by the relentless grip of chronic inflation.

Total credit card debt stood at $986 billion in the first quarter, according to the Federal Reserve Bank of New York’s Quarterly Report on Household Debt and Credit on May 15, showing a record 17 percent jump year-over-year.

However, the total remained flat from the fourth quarter’s record of $986 billion. Still, the lack of a decline is unprecedented for this time of the year.

“Normally, credit-card balances fall from the fourth quarter to the first quarter as the dust settles on the holiday shopping season and consumers prioritize debt payoff as a New Year’s resolution,” Bankrate senior industry analyst Ted Rossman told The Epoch Times. “In fact, this is the only time since the New York Fed started tracking these figures in 2003 that credit-card balances did not fall from the fourth quarter to the first quarter.”

Total household debt rose 0.9 percent in the first quarter of 2023 to a record $17.05 trillion, the report said.

The root causes of this credit stress are manifold and can be traced to the relentless march of inflation coupled with incessantly rising interest rates, Matt Schulz, the chief credit analyst at LendingTree, said during an interview with Fox Business.

Meanwhile, the average credit card annual percentage rate (APR) reached an all-time high of 20.33 percent last week, according to data compiled by Bankrate since 1985. That tops the previous record of 19 percent set in July 1991. Consequently, individuals carrying debt to offset soaring prices may ultimately pay considerably more for goods and services over the long term.

Burgeoning debt-financing costs could soon take their toll on the country’s most vulnerable consumers.

“It’s been a rough year for credit-card holders,” Schulz said. “Even though the Fed seems to be taking their foot off the gas with interest rates, credit-card holders shouldn’t expect a significant improvement anytime soon due to the lack of declining interest rates.”

The alarming surge in inflation has placed an enormous strain on the finances of most U.S. households, compelling them to pay considerably more for everyday essentials such as food and rent.

Low-income Americans bear the brunt of this burden, as price fluctuations disproportionately affect their bottom line. Inflation, which has significantly receded from its peak of 9.1 percent, remains uncomfortably high.

The Consumer Price Index rose by 0.4 percent in April compared to the previous month, according to the latest report from the Department of Labor; that’s a significant increase from March’s 0.1 percent uptick. On an annual basis, prices surged by 4.9 percent, more than twice the average observed before the pandemic.

Biden to Limit Credit Card Fees

Earlier this year, the Biden administration announced a proposed rule that would significantly reduce credit card late fees. The rule, set forth by the Consumer Financial Protection Bureau (CFPB), aims to curtail exorbitant late fees levied by credit card issuers. Currently, these fees can amount to about $30, placing an undue burden on consumers. Under the proposed rule, late fees would be capped at $8, providing substantial relief to cardholders.

“People have lost faith in government’s ability to deliver, have lost faith in the private sector and what they advertise or say they’re delivering, and it’s about just letting people know that we see what’s happening and its totally appropriate to do what we’re doing,” President Joe Biden said during a President’s Competition Council meeting in early February.