Americans have quite a bit of credit card debt. Maybe you heard. Maybe you even have some yourself (“thoughts and prayers”).
TransUnion on Thursday released their quarterly credit insights report, and the news was… well, let’s just call it suboptimal.
“High interest rates and higher-than-expected costs for goods and services continue to squeeze the wallets of American consumers,” a summary read. “This has led to many continuing to leverage their existing credit account lines more than ever.”
Specifically, the average balance hit a 10-year high north of $6,000. According to Bankrate, credit card rates are now 20.72%. So, $6,000 balances at 21% in a country where, famously, between 30% and 40% of households routinely suggest that a $400 emergency would imperil their capacity to meet monthly financial obligations.
The TransUnion release underscored the message from the latest installment of the New York Fed’s household debt report, which showed overall credit card debt in America neared $1.1 trillion last quarter.
With variable rates perched at the highest levels going back at least half a century, that debt burden will be increasingly difficult for some borrowers to service, especially now that student loan payments have resumed and “excess” cash buffers have dwindled.
As noted here earlier this week, it’s impossible to know how much pandemic largesse is left in bank accounts, but it’s safe to say the majority of the cushion is gone for lower-income households.
Recall that card balances were flat at $986 billion in the first quarter. It was the first Q1 in the (relatively short) history of the NY Fed’s data series during which the nation’s credit card balance didn’t fall. Balances grew by $48 billion in Q3, after rising by a similar amount in Q2.
The YoY growth rate, at 16.7%, was even sharper than the 15% pace suggested by the TransUnion report, which put total bank card debt outstanding at $995 billion.
“Of particular note is the balance share of Millennials, which now has surpassed that of Baby Boomers as the second greatest balance share of any generation, only behind Gen X,” TransUnion went on to say Thursday.
The New York Fed data showed that annualized, around 8% of credit card balances transitioned into delinquency. It was the highest rate in a dozen years.
“While Baby Boomers, Gen X , and Gen Z credit card users have delinquency rates similar to their pre-pandemic levels and trends, Millennial credit card users began exceeding pre-pandemic delinquency levels in the middle of last year and now have transition rates 0.4ppt higher than in Q3 of 2019,” a Liberty Street post noted.
The authors pointed out that borrowers who also had auto and student loans had even higher delinquency transition rates. “These repayment difficulties will likely continue to mount for student loan borrowers,” the post said.
