Historically high inflation saddled Americans with an extra $46 billion in credit card debt during the second quarter of 2022, the sharpest increase in more than 20 years according to the Federal Reserve Bank of New York.
This year, credit card debt in the U.S. grew by 5.5 percent from the first to second quarter and is up 13 percent since the same time last year.
“Although seasonal patterns typically include an increase in the second quarter, the 13% cumulative increase in credit card balances since Q2 2021 represents the largest in more than 20 years,” the reserve bank wrote in its quarterly report.
Debt in general is up across the board in the U.S. with housing representing the primary reason Americans go into the red. Non-housing related debt however continues to creep up..
Auto loans increased by $33 billion in the second quarter bringing the total debt associated with personal transportation in the U.S. up to around $1.59 trillion.
Retail credit card debt and other consumer loans grew by $25 billion bringing the total growth of non-housing related debt up by $103 billion, the largest increase since 2016, the reserve bank says.
So far this year, student loans remained relatively unchanged from quarter-to-quarter totaling around $1.59 trillion. The reserve bank says that approximately 5 percent of aggregate student loan debt was over 90 days delinquent or in default in Q2 2022.
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Joelle Scally, Administrator of the Center for Microeconomic Data at the New York Fed said in the report, “The second quarter of 2022 showed robust increases in mortgage, auto loan, and credit card balances, driven in part by rising prices. 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.”
While debt increases the reserve bank says that delinquency on all types of debt “remains historically very low,” saying that the delinquency transition rate for credit cards, auto loans, and other debts increased by a modest 0.5 percent, “with home equity lines of credit increasing by 0.7 percentage points.”
Overall, total household debt increased by $312 billion during the second quarter of 2022, bringing total American debt up by $2 trillion compared to the second quarter of 2019; prior to the emergence of the COVID-19 pandemic.
By Q2 of this year, Americans borrowed an additional $748 billion in mortgage related debt with 65 percent of it originating from borrowers with credit scores above 760. Only three percent of newly originated mortgages were associated with subprime borrowers, significantly lower than the 13 percent average seen between 2003-2007 which drove the 2008 subprime mortgage crisis.
The number of credit inquiries — a strong indicator of consumer credit demand — remained relatively unchanged at 110 million and 233 million new accounts were opened in the second quarter, an increase from the first quarter and the highest seen since 2008.
Overall delinquencies, including mortgage debt, home equity lines of credit, student loan debt, auto loan debt, credit card debt and other debt increased slightly from 0.72 percent in the first quarter of 2022 to 0.84 percent in the second quarter.