America’s combined household debt shot up by $212 billion to a record $17.5 trillion in the final three months of 2023, new figures showed today. 

Amid the rise in debt, the rate of Americans falling into delinquencies was also up between October and December, according to data released by the Federal Reserve Bank of New York today. 

Experts warned a combination of inflation, increased interest rates and the restarting of student loan payments in October led to record credit card debt.

Americans held $1.13 trillion on their credit cards at the end of last year.

‘Credit card and auto loan transitions into delinquency are still rising above pre-pandemic levels,’ said Wilbert van der Klaauw, economic research advisor at the New York Fed. 

‘This signals increased financial stress, especially among younger and lower-income households.’ 

The report also said car loan balances overall were up by $12 billion to $1.61 trillion in the fourth quarter. 

The average interest rate on a given credit card is now roughly 21.5 percent, the highest it has been since the Federal Reserve started tracking rates in 1994.

Silvio Tavares, president and CEO of VantageScore, one of the country’s two major credit scoring systems, said, ‘the reality is that there are starting to be some significant signs of stress,’ despite consumers generally being in good financial health.

The New York Fed report describes credit conditions in an economy that has been growing strongly amid historically low levels of unemployment and rising incomes.

But at the same time, inflation has been high and the Federal Reserve’s aggressive rate hiking campaign has kept short-term borrowing costs high, which in turn has made credit more expensive and challenging to manage for borrowers. 

While the central bank has indicated that it could begin to cut interest rates later this year, benchmark borrowing costs remain at a 22-year high between 5.25 percent and 5.5 percent. 

Generally payments are reported to the credit bureaus as delinquent once they are 30 days past due. Being delinquent on a credit card is damaging for your credit score and late payments remain on your credit report for seven years, experts warn.

‘If you’re late on your payment by fewer than 30 days, paying before the 30th day will keep your delinquency from being reported to the credit bureaus,’ said WalletHub editor John Kiernan. 

Be aware, however, that you may still incur a late fee.

To avoid falling into delinquency on your credit card bills, WalletHub recommends simple steps such as monitoring your spending and creating a realistic budget.

Schedule automatic payments for at least the minimum amount due on your credit cards. This reduces the risk of missing a payment deadline. 

If you are facing financial challenges, communicate with your creditors early, it recommends. 

They may be able to offer temporary solutions, such as a modified payment plan, to help you avoid delinquency. 

The latest New York Fed data comes after a separate study found half of Americans are carrying credit card debt from one month to the next – as raging inflation over the past two years has left a scar on the nation’s finances.

A study from Bankrate earlier this year found that 49 percent fell into the so-called ‘debt revolver’ category in November 2023 – as increasing numbers of households are forced to turn to credit cards to make ends meet.

This is up from just 39 percent in 2021, the financial services company found.

Worse still, three in five of those carrying debt – some 56 million people – have owed money for more than a year.

But experts say there are various steps Americans can take to tackle their credit card debt. 

‘If you have credit card debt, this is probably your highest-cost debt by a wide margin,’ said Rossman. 

‘My top tip is to sign up for a 0 percent balance transfer card. These allow you to move your existing debt to a new card which won’t charge interest for up to 21 months.’

Americans can also consider paying off their credit card debt with a personal loan offering lower rates to save on interest, or seeking help from an accredited financial counselor. 

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