(CTN News) – According to the Federal Reserve Bank of New York’s Center for Microeconomic Data, U.S. consumer credit card debt reached an all-time high of $1.03 trillion in Q2 2023. In its Quarterly Report on Household Debt and Credit, the Federal Reserve tracks a variety of household debts, including mortgages, credit cards, auto loans, and consumer loans.
Credit card debt in the United States increased by $45 billion between Q1 2023 and Q2 2023, reaching a new record of $1,004 billion. Also, the number of credit card accounts in the United States has increased by 5.48 million to 578.35 million.
In just a few years, during the pandemic, consumer protections and consumer spending changes led to a large drop in average credit card balances.
Ted Rossman, Senior Industry Analyst at Bankrate, reports that balances are up 34% from the pandemic low of $770 billion in Q1 2021. “Bankrate reported recently that 47% of credit card holders carry debt from month to month, an increase from 39% in 2021.
In addition, 60% of Americans with credit card debt have had it for at least a year, up 10 percentage points since two years ago.”
The record-high credit card debt may sound alarming, but Rossman points out that the figure of $1.03 trillion does not necessarily indicate that all consumers are in trouble.
According to Rossman, just over half of cardholders avoid interest by paying in full each month, so credit cards are serving them in terms of rewards and buyer protections.
As consumers spend about 70% of their earnings on credit cards, rising credit card balances are also beneficial for the economy.
There is also a rise in credit card balances as a result of population growth and the decline in the usage of cash.”
The best way to deal with credit card debt
You have a few options if you are experiencing debt problems that are negatively affecting your finances.
According to Rossman, one of the best ways to pay off credit card debt is to sign up for a 0% balance transfer credit card. Despite balance transfer fees, these cards offer you the opportunity to pay down your debt interest-free for nine to 21 months.
A debt snowball or debt avalanche are other debt payment strategies that provide a clear step-by-step approach to reducing your debt.
Here is the bottom line
There may be a rise in consumer credit card debt, but strong consumer spending and good credit card repayment habits indicate that this is an inevitable part of our growing economy.
Make sure you pay your credit card balance in full at the end of each billing cycle to make credit cards a useful tool in your wallet and not a financial burden.