Credit cardholders have racked up a further $1,000 of debt on average within the last two years, an indication that Americans are turning to plastic to support their spending while inflation is high.
The common bank card balance per consumer increased to $6,329 within the second quarter, a rise from $5,270 two years ago, based on a recent report from TransUnion, considered one of the three major credit bureaus.
Credit products, including bank cards, “proceed to serve to bridge the financial gaps which will exist in lots of household budgets,” based on the report. TransUnion cites high rates of interest and inflation since 2021 as two of the fundamental pressures credit cardholders have been facing.
“Nearly every part consumers purchase has increased in price,” the report said. “While the speed of inflation has slowed, balances proceed to rise.”
Why bank card balances are rising
Some consumers are opening more bank cards, with the full number reaching 545 million within the second quarter. But that figure has only increased by 2.7% in a yr, and bank card corporations have tightened lending standards for riskier borrowers amid an increase in missed payments and delinquencies.
In keeping with a separate Recent York Fed report earlier this week, about 9.1% of bank card balances became delinquent — or at the very least 30 days overdue — prior to now yr. That is a rise from a rate of seven.2% one yr ago. Cardholders in serious delinquency (overdue for 90 days or more ) can also be up, from 5.1% a yr ago to 7.2% now.
The expansion in bank card debt results from more cardholders carrying balances, while borrowers are also letting their account balances grow.
The variety of consumers carrying a balance was 170.1 million within the second quarter, a rise of nearly 3 million in a yr.
“Higher-risk prime and below segments appear to be experiencing more significant inflationary pressures and as such, counting on their cards more, evident in increasing balances and better utilization,” Paul Siegfried, a senior vp at TransUnion, said within the report.
Total card balances increased to $1.05 trillion within the second quarter, up 8.6% yr over yr, based on the report. On the brilliant side, that rate of increase — while still high — is down from the previous quarter when balances were up 11.3% over the year-ago level.
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