Credit Card Debt in US Reaches $1 Trillion All-Time High — Here Are the Expenses Keeping Americans in Debt

A woman sits on her bed while reviewing her debt and making a credit card payment.
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One of the standard rules of wise financial management is to avoid credit card debt, mainly because you could get stuck in a cycle of paying high interest rates on purchases that you might not have needed anyway. But many Americans are ignoring that advice — at least based on recent data showing that combined U.S. credit card balances passed $1 trillion for the first time.

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Credit card balances during the 2023 second quarter rose by $45 billion to a series high of $1.03 trillion, according to a report this week from the New York Federal Reserve Bank. Retail credit cards and other consumer loans climbed by $15 billion during the quarter.

Meanwhile, credit card delinquencies hit an 11-year high, Reuters reported, as consumers moved further away from the more conservative spending habits they adopted during the COVID-19 pandemic.

“Despite the many headwinds American consumers have faced over the last year — higher interest rates, post-pandemic inflationary pressures, and the recent banking failures — there is little evidence of widespread financial distress for consumers,” New York Fed researchers wrote in a blog accompanying the data release.

As Reuters noted, rising balances will challenge some borrowers, while federal student loan borrowers will be squeezed when payments resume this fall following a three-and-a-half-year pause. Even so, household credit trends show “early signs of stabilizing at pre-pandemic health, albeit with higher nominal balances,” according to the New York Fed.

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High Credit Card Balances Can Damage Your Credit Score

Running up your credit card balance can be a dangerous habit to get into not just because it adds to your debt load, but also because it can ding your credit score. This isn’t a problem if you pay your balance in full each month. But if you carry balances from one statement cycle to the next, you could wind up spending a lot of money on interest alone — especially in an environment of rising interest rates.

“As interest rates feed through from the federal funds rate to interest rates on mortgages and credit cards, that affects everyday consumers,” Sofia Baig, an economist at Morning Consult, told CNN. “So with elevated interest rates, paying that debt becomes more expensive, and with consumers continuing to take on more debt, this combination will put more pressure on some households who have those tighter budgets.”

The average credit card currently charges a near-record 20.53% interest rate, CNN reported. Meanwhile, Fed data indicated that credit card balances have risen for five straight quarters — and some of those increases are among the highest in two decades.

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There are some things you should never charge on your credit cards, including mortgage payments, household bills and medical bills. But even consumers who avoid doing that often use their credit cards to pay expenses that keep them in debt.

A 2022 survey from found that nearly half of credit card holders who carry debt from month-to-month cited emergencies and unexpected expenses as the primary reasons for their credit card debt. Ten percent cited home repairs and another 10% cited car repairs.

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About one-quarter of respondents (24%) who carry credit card debt said their balances were incurred for day-to-day expenses such as groceries, childcare and utilities. Eleven percent cited retail purchases such as clothing and electronics, and an additional 11% cited vacation and/or entertainment expenses.

In many cases, consumers pile up credit card debt simply because credit cards make it so easy to spend money, experts say.

“People tend to spend more when using credit cards than cash,” MIT psychology researcher Drazen Prelec told Forbes. “Not only are they more likely to buy something at a higher price, they also are likely to give larger tips and make more impulse buys.”


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