US household debt surpassed $16 trillion for the first time ever during the second quarter, the New York Federal Reserve said Tuesday.
Even as borrowing costs surge, the NY Fed said credit card balances increased by $46 billion last quarter.
Over the past year, credit card debt has jumped by $100 billion, or 13%, the biggest percentage increase in more than 20 years. Credit cards typically charge high interest rates when balances aren’t fully paid off, making this an expensive form of debt.
“The impacts of inflation are apparent in high volumes borrowing,” NY Fed researchers wrote in a blog post.
Not only are credit card balances rising, but Americans opened 233 million new credit card accounts during the second quarter, the most since 2008, the NY Fed report found.
Despite rising debt levels, the NY Fed said consumer balance sheets appear to be in a “strong position” overall.
Most of the 2% quarter-over-quarter increase in US household debt to $16.2 trillion was driven by a jump in mortgage borrowing. Student loan balances were little changed at $1.6 trillion.
“Although debt balances are growing rapidly, households in general have weathered the pandemic remarkably well,” the NY Fed said in the report, noting the unprecedented assistance from the federal government during the onset of Covid-19.
There are hints, however, that some lower-income and subprime borrowers are now struggling to keep up with their bills.
“With the supportive policies of the pandemic mostly in the past, there are pockets of borrowers who are beginning to show some distress on their debt,” the report said.
Helped by moratoriums and forbearance programs, foreclosures remain “very low,” according to the report.
However, credit reports indicate the number of new foreclosures increased by 11,000 during the second quarter, the NY Fed said, potentially signaling the “beginning of a return to more typical levels.”