One Major Way U.S. Credit Card Debt Is Getting Worse
American debt continues to rise, according to the New York Federal Reserve.
By Maria LaMagna
MarketWatch
August 16, 2017
Americans are increasingly delinquent on their credit-card debt.
Credit-card delinquencies have increased in recent months, according to a new report released Tuesday by the New York Federal Reserve.
Some 4.4% of credit-card debt became newly delinquent in the second quarter of 2017, up from about 3.5% in the second quarter of 2016. This compares to rates between 8% and nearly 11% during the peak of the recession. “We will closely monitor the degree to which this uptick is predictive of further consumer distress,” said Andrew Haughwout, senior vice president at the New York Fed.
Americans are increasingly delinquent on their credit-card debt.
Credit-card delinquencies have increased in recent months, according to a new report released Tuesday by the New York Federal Reserve.
Some 4.4% of credit-card debt became newly delinquent in the second quarter of 2017, up from about 3.5% in the second quarter of 2016. This compares to rates between 8% and nearly 11% during the peak of the recession. “We will closely monitor the degree to which this uptick is predictive of further consumer distress,” said Andrew Haughwout, senior vice president at the New York Fed.
There were also modest increases in mortgage and auto debt in the second quarter of 2017, the New York Fed found. Total household debt now amounts to $12.84 trillion in the second quarter of 2017, up 0.9% since the first quarter. Mortgage debt increased 0.7% and auto debt increased 2%, compared to a 2.6% rise in credit card debt.
Total mortgage debt now amounts to $8.69 trillion, up $329 billion since last year. Auto loan debt now amounts to $1.19 trillion, up $87 billion since last year. And student loan debt amounts to $1.34 trillion, up $85 billion since last year.
The New York Fed calculates credit-card debt differently than the Federal Reserve, which includes more forms of debt in its “revolving debt” calculation. The New York Fed said Americans have $784 billion in credit card debt in the second quarter of 2017, compared to the Fed’s estimate of more than $1 trillion in revolving debt. The New York Fed found that Americans increased their credit card debt $55 billion since last year.
The country also hit a scary milestone earlier this month: Americans now collectively have the most outstanding revolving debt — often summarized as credit card debt — in U.S. history, according to a report released this month by the Federal Reserve. Americans had $1.021 trillion in outstanding revolving credit in June 2017. This beats the previous record in April 2008, when consumers had a collective $1.02 trillion in outstanding credit revolving credit.
The country also hit a scary milestone earlier this month: Americans now collectively have the most outstanding revolving debt — often summarized as credit card debt — in U.S. history, according to a report released this month by the Federal Reserve. Americans had $1.021 trillion in outstanding revolving credit in June 2017. This beats the previous record in April 2008, when consumers had a collective $1.02 trillion in outstanding credit revolving credit.
“This record should serve as a wake-up call to Americans to focus on their credit card debt,” said Matt Schulz, a senior industry analyst at CreditCards.com, a credit card website. “Even if you feel your debt is manageable right now, know that you could be one unexpected emergency away from real trouble.”
Revolving credit has been growing at an annual growth rate of 4.9%. One reason: More consumers are getting access to credit cards backed by major banks and issuers in recent months. More than 171 million consumers had access to those cards in the first quarter of 2017, the highest number that has had access since 2005, when about $162.5 million people had access.
For the first time since the Great Recession, lenders have given more consumers with sub-prime, or below average, credit scores, access to credit cards, but they are giving them lower spending limits, according to the credit reporting agency TransUnion TRU, +0.09%
There has also been an increase in the aggregate credit limits on credit cards, but higher-credit score borrowers, who have a greater likelihood of paying their debts back, have seen the largest increase in their limits, the New York Fed found.
Lending to people who are unlikely to pay debts back can have disastrous effects, from keeping families in debt for years to ruining their credit scores, which makes it more difficult for them to borrow responsibly in the future.
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