US credit card debt now totals nearly $1 trillion

As US lawmakers are holding back-to-back meetings to discuss the deficit limit, US families are piling up credit card debt. Read to know about the looming crisis.

Credit card debt is ballooning in the US

As per a New York Federal Reserve report, the credit card debt of Americans stood at $986 billion towards the end of March. The balances remained flat in the first quarter of the year, indicating that households in the US were depending on credit cards for everyday spending. In the US, this rises around the holiday season. Hence, in subsequent months, people focus on reducing their burden by repaying debt. However, with rising inflation, 2023 is an anomaly. The ‘buy first, pay later’ is a typical mindset of the US consumer culture and it helps in warding off any immediate expenditure. However, this plays a huge role in leading the burden to record levels.

The ballooning household debt is a bad omen for the economy

The ballooning household debt is a bad omen for the economy. For example, around the end of 2008, it hit $12.68 trillion following the housing boom. It also contributed to the 2008-09 recession. “While part of this reduction stemmed from a historic increase in consumer defaults and lender charge-offs, particularly on mortgage debt, other factors were also at play. Households actively reduced their obligations during this period by paying down their current debts and reducing new borrowing,” revealed a 2013 report by the Federal Reserve of New York.

In 2023, banks might face debt delinquency. This is a scenario when people delay their debt repayments. As of March 2023, the overall delinquency rate was 2.6 percent. While this is low by historical levels, the share of debt is turning delinquent. Among them, loans unpaid over 30 days are rising among all types of loans including credit card debt.