Credit Card Debt Hits Record High of $1.17 Trillion

In the third quarter of 2024, U.S. credit card debt reached a record $1.17 trillion, marking a $24 billion increase from the previous quarter. Despite this rise, the rate of new credit card delinquencies slightly decreased to 8.8% from over 9% in the second quarter, indicating that consumers are managing their debts more effectively. This improvement is partly attributed to easing inflation, which has reduced the need for credit reliance.

However, other debt categories, such as auto loans and mortgages, have seen increases, with auto loan delinquencies continuing to rise. As the holiday season approaches, there is concern that increased spending may lead to higher credit card balances and potential delinquencies in early 2025.

Bank executives have expressed optimism about the financial health of American consumers, noting that many have more funds in their bank accounts compared to pre-pandemic levels. However, disparities exist among demographic groups, with younger and lower-income consumers experiencing higher delinquency rates.

The Federal Reserve Bank of New York reported that total household debt rose by 0.8% to $17.9 trillion in the third quarter, continuing a post-pandemic upward trend. Despite the rise in missed payments, researchers remain cautiously optimistic due to income growth outpacing debt increases, resulting in a manageable debt burden.

As the holiday season approaches, there is concern that increased spending may lead to higher credit card balances and potential delinquencies in early 2025. Consumers are advised to monitor their spending and manage their debts responsibly to maintain financial stability.