Americans are drowning in credit card debt as balances soar past pre-pandemic highs

 

By Michael Grothaus

 

Credit card debt in America has reached staggering new levels, according to a report from the Federal Reserve Bank of New York’s Center for Microeconomic Data. In its Quarterly Report on Household Debt and Credit, the New York Fed found that in the fourth quarter, credit card balances rose by $61 billion, meaning total outstanding credit card debt held by Americans reached $986 billion. The pre-pandemic high was $927 billion in Q4 2019.

Commenting on the report’s findings, Bankrate senior industry analyst Ted Rossman pointed out that credit card balances rose 7% over the last quarter alone, and 15% over the last year. That’s a far cry from their Q1 2021 position when balances were actually 17% below pre-pandemic highs. 

“Those days are long gone, with balances up a staggering 28% since then,” says Rossman. “For a while, Americans took advantage of stimulus payments and the fact that they were spending less due to pandemic concerns to make major progress paying down their credit card debt. But robust consumer spending, the hottest inflation readings in 40 years, and sharply higher credit card rates have combined to push credit card balances to a new record high.”

But credit card debt isn’t the only thing that has risen—especially when it comes to debt impacting Gen Z consumers. The New York Fed’s report also found that student loan debt increased by $21 billion in the current quarter to $1.6 trillion. Auto loan debt was also up; it rose $28 billion in the quarter to a total of $1.55 trillion.

 

As for what to do if you’re struggling with credit card debt, Bankrate’s Rossman says prioritizing your credit card rate is critical: “My top tip is to sign up for a 0% balance transfer card. These allow you to pause the interest clock for up to 21 months.”

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