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US credit card debt reaches unprecedented $1.08 trillion

  • / Updated:
  • Staff Report 

The United States has seen a dramatic surge in credit card debt, with a $48 billion increase in the third quarter of 2023, setting a new high of $1.08 trillion, the Federal Reserve Bank of New York reported Tuesday.

This 4.6% rise from the second quarter signifies an escalating reliance on credit for American consumers amidst challenging economic conditions.

Delinquencies in repayments are on the rise, with approximately 3% of all outstanding debt, including credit card, auto, and student loans, now overdue. The situation is compounded by the prevalence of “persistent debt,” where borrowers pay more in interest and fees than the principal balance, essentially trapping them in a cycle of debt.

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The Federal Reserve’s interest rate increases have exacerbated this issue, pushing variable credit card rates above 20% for some, making it increasingly difficult for individuals to escape this burdensome debt.

Experts attribute the uptick in credit card debt to various factors, including high inflation which forces consumers to depend on credit for everyday expenses. Consequently, balances are carried over month-to-month, incurring substantial interest charges.

The New York Fed points to a possible buildup of financial stress among consumers, potentially linked to job losses, reduced income, and the impacts of sustained high inflation, affecting different demographics in unique ways.

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