Compared to a year earlier, credit card debt grew at its fastest pace in 20 years

Compared to a year earlier, credit card debt grew at its fastest pace in 20 years

Compared to a year earlier, credit card debt grew at its fastest pace in 20 years

Credit card debt surged in the US from April to June as Americans borrow billions of dollars to continue spending amid rising inflation, according to a Tuesday report from the Federal Reserve Bank of New York.

Credit card balances grew by $46 billion in the second quarter, up 5.5% from the first quarter, and there was also an uptick in new credit card accounts. The 13% increase from Q2 2021 to Q2 2022 is the biggest leap in more than 20 years.

“Americans are borrowing more, but a large portion of the increase in borrowing is due to higher prices,” the New York Fed researchers said in a press release.

The US economy contracted again in the second quarter, buoying recession fears

The numbers provided fresh context for a consumer spending report released last week by the Bureau of Economic Analysis, which showed spending in June rose 1.1%. Similar to the Fed’s findings in New York, gas prices, which rose above $5 per gallon in many parts of the country in the second quarter, and inflation, which rose 9.1% year-on-year in June, were the main drivers. can cause debt to increase.

The number of new credit card accounts increased in the second quarter – 233 million – marking a high not seen since 2008, according to Tuesday’s report. But the New York Fed researchers note that the delinquency rate for credit card debt remains relatively low. Despite the slight increase, it is still below the pre-pandemic figure. Total credit card balances grew to $890 billion in the second quarter, up $100 billion from the same time last year.

The report released on Tuesday showed that household debt increased by $312 billion in the second quarter, or 2% from the first quarter. The total balance is now $2 trillion higher than it was before the pandemic.

Mortgage balances posted the biggest gains, with the central bank raising interest rates to cool down a hot housing market. Auto loans also increased, with balances for the second quarter increasing by $33 billion, on track to increase since 2011, according to the report.

Joelle Scally, administrator of the New York Fed’s Microeconomics Data Center, said in a press release: “The second quarter of 2022 saw a strong increase in mortgage balances, loans and purchases. cars and credit cards, partly due to rising prices. ” close to pre-pandemic levels.”

Rising credit card debt reflects consumers’ struggles to keep up with inflation. The persistently high prices of groceries, gasoline and other basic needs have changed the way Americans spend money – giving up clothing and the tech aisle to buy household necessities.

Some retailers have displayed warning signs.

Last week, Walmart slashed its quarterly and full-year profit forecasts, announcing massive price cuts on merchandise to ease inventory. The move rocked Wall Street, with shares of the nation’s largest retailer falling 7.6% and dragging other major retailers, including Target, Macy’s and Kohls.

Best Buy CEO Corie Barry also noted last week that more informed and purposeful consumers’ spending has led to a drop in demand for electronics. Consumer product companies have also hinted at a decline recently. The Procter & Gamble CEO warned that the company expects a tougher 2023.

Written by hoangphat

Leave a Reply

Your email address will not be published. Required fields are marked *

GIPHY App Key not set. Please check settings

Processing fees and charges for credit card transactions

Chase Increases Sign-Up Bonus for the Sapphire Reserve