This year the U.S. had the biggest jump in credit card debt in more than 20 years.
Credit card debt surged nationally from April through June as Americans borrowed billions of dollars to continue spending in the face of growing inflation, according to a report from the Federal Reserve Bank of New York.
Credit card balances increased $46 billion in the second quarter, a 5.5% increase from the first quarter. The 13% increase from the second quarter of 2021 to the second quarter of 2022 was the biggest such jump in more than 20 years. There was also an influx of new credit card accounts.
“Americans are borrowing more, but a big part of the increased borrowing is attributable to higher prices,” researchers for the New York Fed said in a news release.
The numbers provide new context for a consumer spending report released by the Bureau of Economic Analysis last week, which showed that spending in June climbed 1.1%. Similar to the New York Fed’s findings, gas prices, which surged past $5 a gallon in many parts of the country in the second quarter, and inflation, which jumped 9.1% year over year in June, were the likely drivers of the increased debt, reports The Washington Post.
The highest increases were mortgage balances, which is in line with the central bank’s raising interest rates to cool down the blazing hot housing market. Auto loans also went up, with balances in the second quarter increasing by $33 billion, on track with increases since 2011, according to the report.
“The second quarter of 2022 showed robust increases in mortgage, auto loan, and credit-card balances, driven in part by rising prices,” Joelle Scally, administrator of the Center for Microeconomic Data at the New York Fed, said in a news release. “While household balance sheets overall appear to be in a strong position, we are seeing rising delinquencies among subprime and low-income borrowers with rates approaching pre-pandemic levels.”
This increase in credit card debt is a reflection of consumers trying to keep up with inflation and high prices on groceries, gasoline and other basic needs.
