Inflation leads to record increase in consumer credit card debt

U.S. credit card user balances grew by $46 billion in the second quarter of 2022, a 13% spike that’s the biggest year-over-year jump in 20 years and proof that consumers are taking on more and more debt to cope with ongoing record inflation.

This is according to the Federal Reserve Bank of New York Quarterly Report on Household Debt and Creditpublished on Tuesday.

The analysis also pegged overall US consumer debt at a record high of $16.2 trillion, some $2 trillion more than at the end of 2019, before the COVID-19 pandemic began. .

While average hourly wages for American workers have risen at a relatively steady pace and are up at least 5% since the same time last year, rising costs for goods and services easily outpace these wage increases, inflation reaching 9.1% in June. , according to the latest federal data.

A analysis published in June by LendingClub found that 61% of US consumers, or about 157 million adults, were living paycheck to paycheck in April, and price increases have only intensified since then.

Consumer debt is on the rise in all areas: While credit card debt growth was one of the largest increases in the report, Fed data shows consumer debt levels rose across all categories except for overall student loan debt, which remained essentially flat.

Mortgage balances were the main driver of the overall increase, climbing $207 billion since the first quarter of 2022, auto loan balances rose $33 billion and debt classified as “other balances” in the report, which includes retail cards and other consumer loans, rose $25 billion.

Fed analysts say growth in each category of debt reflects increased consumer borrowing due to higher prices. These inflationary impacts are clearly illustrated by the extra amount consumers now have to borrow to cover the cost of a car or home. According to the report, the average dollar amount of these loans, at origination, has increased by 36% each since 2019.

And while the report notes that U.S. consumers, as a whole, are currently in relatively decent financial shape, inflation-induced price increases are hitting low-wage earners the hardest.

“The second quarter of 2022 showed large increases in mortgage, auto loan and credit card balances, in part due to rising prices,” said Joelle Scally, administrator of the Center for Microeconomic Data at the New York Fed, in a statement. “While household balance sheets appear to be in good shape overall, we are seeing an increase in delinquencies among risky and low-income borrowers with rates approaching pre-pandemic levels.”

Personal debt levels and more: A report released earlier this year by Credit Summit found stark differences in personal debt levels when analyzed by a consumer’s age, education level or family size.

Data points in this report include:

  • The average consumer debt was $92,727 in 2021.
  • Generation X carries the most consumer debt of any generation, at $140,643 on average.
  • People with higher levels of education have higher consumer debt balances, and borrowers with doctorates carry the most at $97,916.
  • Higher-educated people have higher credit card balances, with college graduates having the most at $7,900.
  • Average consumer debt is the highest in the District of Columbia at $148,041. Utah‘s average consumer debt in 2021 was well above the national average at $114,293.
  • Auto and student loans doubled after the Great Recession.
  • Having children increases the likelihood of taking on credit card debt: 51% of households with children have a credit card balance, compared to 42% of families without children.

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