Credit card balances jumped by $45 billion in the fourth quarter of 2024. They are now 7.3% higher than a year ago, according to a new report from the Federal Reserve Bank of New York. At the same time, delinquency rates remained elevated.
The New York Fed researchers found that 7.18% of balances transitioned to delinquency over the last year. That uptick could indicate borrowers are having some difficulty repaying. “No one should be surprised that credit card debt hit another record high,” said Matt Schulz, chief credit analyst at LendingTree.
“Stubborn inflation has shrunk a lot of Americans’ financial margin for error from slim to about none. This is forcing people to lean more heavily on credit card debt,” Schulz added. Credit card debt has remained stable over the last two decades.
However, in the years since the pandemic, households largely spent down their excess savings.
Credit card debt soaring
This sparked a rebound in credit card balances.
Consumer spending continues to remain strong, despite high borrowing costs. “There’s very little reason to believe that we won’t continue to see new credit card debt records being set going forward,” Schulz said. Meanwhile, credit cards have become one of the most expensive ways to borrow money.
Lower-income households that had to stretch to cover expenses have been hit especially hard. This is after the Federal Reserve’s series of rate hikes lifted the average credit card rate to more than 20%. “For people who are carrying a balance, a higher interest rate is going to make those balances rise more quickly.
It’s also going to make the payments higher on a monthly basis,” the New York Fed researchers noted. As credit card debt continues to climb, it’s clear that many Americans are feeling the squeeze. This is from both elevated living costs and borrowing rates.
