U.S. credit card balances climbed to $1.08 trillion in the third quarter of 2023, the highest level on record, according to data released by the Federal Reserve Bank of New York. This represents a 4.7% increase from the previous quarter and a substantial 15.4% jump compared to a year ago.
Experts say the swell in credit card debt reflects robust consumer spending as well as rising inflation and interest rates. With the cost of goods and services going up, many Americans have relied on plastic to make purchases. At the same time, the Federal Reserve’s series of rate hikes this year have made carrying balances more expensive.
“The increase in interest rates has clearly made credit card debt more costly for many households, which is likely leading some to take on even more debt to keep up with expenses,” said Robert McKinley, chief analyst at CardFlash.com.
The ballooning debt load is raising red flags among financial analysts, who warn it could lead to a rise in defaults and bankruptcies. It also puts pressure on household finances as more income goes toward paying interest charges rather than spending and saving.
To manage credit card debt, experts advise creating a budget, paying more than the minimums due, limiting everyday plastic purchases, and contacting card issuers or credit counseling agencies if struggling to make payments. Consolidating high-interest balances into lower-rate loans is another option.
“Getting educated on smart credit card use and taking steps to pay off balances are critical right now,” McKinley said. “The higher interest rates have made revolving debt a more dangerous game for many consumers.”
