America’s credit addiction is getting costlier by the day.

For the first time, Americans are paying nearly as much interest on non-mortgage debt as they are on mortgage interest payments—a trend that underscores households’ over-reliance on revolving credit.

Interest payments

According to data from the Bureau of Economic Analysis, non-mortgage interest payments reached $573.4 billion annually in January—nearly matching the $578.3 billion spent on mortgage interest in the final quarter of 2023.

As Creditnews reported, this alarming milestone was reached even as mortgages account for more than 70% of U.S. household debt. That means the remaining 30% eats up just as much in interest payments.

Higher interest rates on credit cards, auto loans, and even student loans are making it costlier for households to service their debts.

Credit card debt reached a record $1.13 trillion in the fourth quarter, while auto balances climbed to $1.61 trillion—resuming an upward trajectory that began over a decade ago.

Unlike mortgages, which can be locked in for 30 years, revolving credit products are much more sensitive to changes in interest rates. Since the Fed began hiking rates two years ago, interest rates on consumer credit lines have skyrocketed.

“Consumers are carrying much higher balances than they were two years ago,” TransUnion’s Charlie Wise told The Wall Street Journal. “There are always people at the margin where any increase in rates is going to hurt them.”

Indebted Americans are facing a double whammy of rising debt balances and higher interest payments—a trend that could have devastating consequences for families and the economy.

“Levered to the hilt”

TransUnion estimates that the average credit card balance has reached $6,360—a 10% increase over a year ago and the highest on record. But it gets worse.

A November 2023 Bankrate survey found that nearly one in two cardholders carries debt from month to month. Average credit card interest rates exceed 21%, so that’s a costly mistake.

Then there’s the fact that about one in four Americans goes deeper into debt each month—with a huge chunk of their payments going toward interest and fees.

A growing share of borrowers are struggling with payments, too. According to the New York Fed, credit card delinquencies surged by 50% in 2023. TransUnion says “serious delinquencies,” or accounts that are 90 days or more past due, have reached the highest level since the financial crisis.

“Many consumers are levered to the hilt—maxed out on debt and barely keeping their heads above water,’’ said Allan Schweitzer, a portfolio manager at Beach Point Capital Management. “They can dog paddle, if you will, but any uptick in unemployment or worsening of the economy could drive a pretty significant spike in defaults.”

It’s little surprise that consumers’ ability to service their debt hinges almost entirely on their employment. But a closer look at the data reveals just how closely Americans are living on the razor’s edge.

Living paycheck to paycheck

Americans are spending more, but their underlying financial health isn’t improving.

Recent Bankrate research found that 44% of consumers can’t pay an unexpected $1,000 expense. More than 80% weren’t able to boost their emergency savings at all in 2023—even as their spending increased.

It goes without saying that most Americans have higher credit card balances than they do savings. That partly explains why 78% of consumers continue to live paycheck to paycheck, according to research from

Some of the most commonly cited reasons for a lack of savings are high monthly bills, low income, a lack of financial planning, and unexpected emergencies. These factors feed into a vicious cycle that’s exacerbated by high interest rates, rising prices, and larger debt burdens.

“Many households are seeing their finances stretched thinly by the combination of high prices for goods and services as well as high interest rates,” said Brett House, an economics professor at Columbia Business School.

Americans are waiting for the Fed to ease some of their financial burden by cutting interest rates. But there’s no guarantee that rate cuts will come soon.

In February, Treasury Secretary Janet Yellen told a Senate Banking Committee that she doesn’t “expect the level of prices to go down.” In some cases, “prices will be higher than they were before the pandemic, and will stay higher,” she said.