US household debt surpassed $16 trillion for the first time ever during the second quarter, the New York Federal Reserve said on Tuesday.
Even as borrowing costs rose, the NY Fed said credit card balances rose by $46 billion last quarter.
Over the past year, credit card debt has increased by $100 billion, or 13%, the largest percentage increase in over 20 years. Credit cards tend to charge high interest rates when balances are not paid in full, making this an expensive debt.
“The effects of inflation are visible in a high number of loans,” NY Fed researchers wrote in a blog post.
Not only are credit card balances rising, but Americans opened 233 million new credit card accounts during the second quarter, the most since 2008, a NY Fed report found.
Despite rising debt levels, the NY Fed said consumer balance sheets appear to be in a “strong position” overall.
Most of the 2% quarter-over-quarter increase in US household debt to $16.2 trillion was driven by a jump in mortgage lending. Student loan balances were little changed at $1.6 trillion.
“Although debt balances are growing rapidly, households in general have weathered the pandemic very well,” the NY Fed said in the report, noting the unprecedented assistance from the federal government during the onset of Covid -19.
However, there are signs that some lower income and subprime borrowers are now struggling to keep up with their bills.
“With pandemic support policies largely in the past, there are pockets of borrowers that are starting to show some distress on their debt,” the report said.
With the help of moratoriums and forbearance programs, foreclosures remain “very low,” according to the report.
However, credit reports show that the number of new foreclosures increased by 11,000 during the second quarter, the NY Fed said, may be a sign of the “beginning to return to more typical levels.”