Credit card analysis | The State of Credit Card Debt

The use of credit cards has become an integral part of American consumer culture. From everyday purchases to emergency expenses, credit cards provide a convenient way to manage finances. However, with this convenience comes the risk of accumulating debt. In this article, we will examine the current state of credit card debt in the USA, exploring factors such as the total debt amount, regional variations, and delinquency rates. By understanding these trends, individuals can make informed decisions about their financial well-being.

Credit card analysis
Credit card analysis


How much credit card debt do Americans have?

According to the latest consumer debt data from the Federal Reserve Bank of New York, Americans’ total credit card balance reached a staggering $1.031 trillion in the second quarter of 2023. This marks the first time credit card debt has surpassed the $1 trillion threshold in the country’s history. The second quarter of 2023 saw a $45 billion increase in credit card debt, following a first quarter where the debt level remained unchanged. This lack of decrease in debt is a departure from historical trends, as credit card debt has typically fallen in the first quarter of each year.

The total credit card balance has risen by $175 billion since the fourth quarter of 2021, surpassing the previous record set in the fourth quarter of 2019. These record balances are significantly higher than the $478 billion seen in the first quarter of 1999. The chart below illustrates the growth of credit card debt over the years.

Credit Card Debt Growth

Regional Variations in Credit Card Debt
While credit card debt is a nationwide issue, there are notable regional variations in debt levels. LendingTree data reveals that Connecticut residents have the highest average credit card debt among all states, with an average balance of $9,408. On the other hand, Kentucky residents have the lowest average credit card debt, with an average balance of $5,408. The table below highlights the states with the highest and lowest average credit card debt.

State Average Credit Card Debt Connecticut $9,408 Alaska $8,591 New Jersey $8,138 Virginia $7,993 Kentucky $5,408 It is worth noting that credit card debt has grown in most states, with 25 out of 50 states experiencing an increase of 10% or more in average credit card debt from December 2021 to December 2022. Mississippi and North Dakota saw the highest growth rates, with average debt increasing by 25.2% and 24.4%, respectively.

The Percentage of Credit Card Accounts Carrying a Balance

Despite the ideal scenario of paying off credit card balances in full each month, many Americans carry a balance on their credit card accounts. Data from the American Bankers Association reveals that in the third quarter of 2022, 56% of all active credit card accounts carried a balance. This figure represents an increase of 3 percentage points from the previous quarter.

While it is encouraging to see that the percentage of active accounts carrying a balance is still below pre-pandemic levels, it is essential to recognize the challenges faced by individuals in managing credit card debt. According to a LendingTree survey conducted in November 2022, only 35% of cardholders reported consistently paying their credit card balance in full each month. Additionally, 46% of cardholders with debt stated that it would take them at least a year to pay off their balances.

Average Interest Rates on Credit Cards

Interest rates on credit cards play a significant role in determining the cost of carrying a balance. In the second quarter of 2023, the average annual percentage rate (APR) for all credit cards was 20.68%. For cards that accrue interest, the average APR was slightly higher at 22.16%. These rates represent the highest levels since tracking began in 1994.

When considering new credit card offers, the average APR is even higher at 24.37%. It is crucial to note that these rates have increased in recent months due to multiple interest rate hikes by the Federal Reserve. The chart below provides an overview of the average APRs for new credit card offers and current card accounts.

Average APRs for new credit card offers and current card accounts Average APR for new credit card offers Average APR for all current card accounts Average APR for all accounts that accrue interest Delinquency Rates
Delinquency rates reflect the percentage of outstanding credit card balances that are at least 30 days overdue. According to the most recent data from the Federal Reserve, the 30-day delinquency rate increased from 2.25% to 2.43% in the first quarter of 2023. While this marks the sixth consecutive quarter of increases, it is important to note that delinquency rates remain near historic lows. During the Great Recession, delinquencies peaked at nearly 7% in 2009.

Credit Card Delinquency Rates

Understanding the current state of credit card debt in the USA is crucial for individuals seeking to improve their financial well-being. By being aware of the total debt amount, regional variations, and delinquency rates, individuals can make informed decisions about managing and reducing their credit card debt. It is essential to develop strategies such as budgeting, paying off balances in full, and exploring lower-interest options to achieve financial stability. By taking proactive steps, individuals can regain control of their finances and mitigate the risks associated with credit card debt.

Data source: LendingTree, Federal Reserve Bank of New York, American Bankers Association

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