Credit card debt is rising by billions of dollars at the worst possible time
Rising credit card debt, inflation, consumer balance sheets, household spending.
A combination of inflation and climbing interest rates seems to be stretching consumers' balance sheets, but it's not clear yet whether they're getting to a breaking point.
Newly released data from WalletHub says U.S. consumers took on $43 billion in additional credit card debt during the second quarter of this year, ending in June. That's more than triple the average amount of new debt households have taken on in that period since after the Great Recession of 2007-08.
Total credit card debt and debt per household grew by about 8% from the year before, according to WalletHub, a personal finance website. It based its calculations on data from the Federal Reserve and the credit reporting agency TransUnion.
Credit card debt at the average household stood at $10,170 at the end of June. While those balances are rising, the average household has a bit less monthly credit card debt than it did before the coronavirus pandemic took hold in early 2020. Things were also worse before the financial crisis; WalletHub says its all-time high debt reading was $12,412 per household.
Still, the effects of higher interest rates seem clear. The benchmark U.S. interest rate was a little above zero until March 2022, at the end of the first quarter of the year. Then the Federal Reserve began quickly raising interest rates. After the latest hike in July, rates are now in a range of 5.25% to 5.50%, the highest they've been in more than 20 years.
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