Credit card debt hits new record as delinquencies rise

Americans owe more credit card debt than ever before, and a growing share of them are struggling to make their payments on time, new data shows.

According to the New York Fed, Americans collectively owed a record $1.14 trillion in credit card debt at the end of the second quarter, marking a $27 billion jump from the previous quarter.

Perhaps more concerning, roughly 7.18% of credit card debt transitioned into “serious delinquency” in the second quarter, up from 5.08% a year ago.

(Cardholders are considered seriously delinquent when they fail to make payments within 90 days.)

Younger borrowers between the ages of 18 to 29 and 30 to 39 struggled the most with delinquency. The New York Fed concluded that these age groups were the hardest hit during the pandemic.

As CNBC reported, delinquent borrowers tend to be renters with shorter credit histories and lower credit card limits. Due to competing financial priorities, these borrowers are more likely to push off payments.

Credit cards come to the rescue

Higher credit card balances mean more consumers carry debt balances from month to month, usually at sky-high interest rates.

As Creditnews reported, typical credit card APRs have nearly doubled over the past decade and currently sit around 23%. Several store credit cards charge APRs north of 30%.

According to a new survey by digital finance company Achieve, 57% of consumers rely on credit cards for day-to-day expenses. More than a third (36%) of survey respondents said they’re having trouble paying recurring bills on time.

A separate Bankrate survey found that 50% of cardholders carry a balance each month, up from 44% in January. Both surveys blame the rising cost of living for Americans’ growing reliance on credit cards.

While estimates vary, the latest report from TransUnion found that the typical American carries $6,329 in credit card debt, a 6% increase from a year earlier.

Borrowers with credit card debt are “mare maxing out their credit cards,” said TransUnion executive Michele Raneri. This is “usually a pretty good indicator that people are stretched.”

Another indicator that consumers are struggling is the percentage of credit card accounts that are in “persistent debt,” or where payments mainly go toward interest and fees rather than paying down the principal balance.

According to the Consumer Financial Protection Bureau (CFPB), roughly one in ten credit card accounts are in this category, up from 8.4% during the pandemic.

“People get into this situation they can’t get out of. The fees and interest keep people trapped there,” a CFPB spokesperson said.