American credit card debt has just reached a new and undesirable milestone: for the first time, it exceeds $1 trillion, according to data released on Tuesday (8) by the Federal Reserve Bank of New York.
During the second quarter, credit card balances surged by $45 billion, or nearly 4.6%, to $1.03 trillion, according to the latest quarterly report from the New York Fed on household debt and credit.
The increase in credit card debt and auto loan balances helped raise the overall level of household debt by 1%, to $17.06 trillion in the quarter, the report showed. Overall household debt for Americans has risen by $2.9 trillion since the end of 2019, before the pandemic.
This increase comes as interest rates are at their highest in the last 22 years.
With high interest rates, paying off debt becomes more expensive, and as consumers continue to take on more debt, this combination puts more pressure on some families with tighter budgets.
Credit cards are charging an almost record interest rate of 20.53%, according to Bankrate.
More people are tapping into their 401(k) accounts due to financial hardships
On Tuesday (8), Bank of America reported that more people were accessing their 401(k) accounts due to financial difficulties. The number of people who made hardship withdrawals during the second quarter increased from the first three months of the year to 15,950, a 36% increase compared to the second quarter of 2022.
Although this type of withdrawal is being made by a small fraction of 401(k) plan holders, it is another indication that cracks may be forming in the financial situation of Americans.
Source: CNN