Credit-card balances just experienced the biggest annual jump in more than 20 years, Fed says


By Emma Okerman

The third quarter brought higher credit card and mortgage balances, increasing household debt by $351 billion, according to the New York Fed.

Credit card balances saw their biggest annual increase in more than 20 years in the third quarter, up 15% from a year ago to $930 billion as Americans tried to deal with a higher cost of living, according to data from the Federal Reserve Bank of New York. York was released on Tuesday.

Total household debt also recorded its largest quarterly nominal jump since 2007, rising $351 billion, in part due to a $282 billion increase in mortgages in the third quarter, the New York Fed said in its latest quarterly report on debt and credit households. Credit card debt was also a big contributor, due to the $38 billion increase in balances from the prior quarter, the report added. said a group of researchers from the New York Fed in a blog post Tuesday. “Credit card balances, in particular, have grown nearly double since last year. The real test, of course, will be whether these borrowers will be able to continue making payments on their credit cards.”

To that end, default rates have also begun to rise, but remain low compared to historical trends, Fed researchers said.

Credit card balances rose rapidly in 2022 after a decline earlier in the pandemic, when the federal government injected trillions of dollars into the economy through two stimulus packages that sent consumers stimulus checks, increased unemployment benefits and expanded the child tax credit. Those programs helped increase financial security, reduce poverty rates, and drive massive declines in credit card balances.

But those benefits are long gone: The last stimulus check went out in March 2021, additional unemployment benefits withered in September 2021, and the increased tax credit that gave parents up to $300 a month per child every month expired in December.

In terms of other forms of debt, auto loans increased $22 billion to $1.52 trillion in the third quarter, and mortgages increased $282 billion to $11.67 trillion. Student loan balances fell $15 billion to $1.57 trillion, while mortgage production, including refinances, fell $126 billion to $633 billion.

“Credit card, mortgage and car loan balances continued to increase in the third quarter of 2022 due to a combination of robust consumer demand and higher prices,” Donghoon Lee, economic research advisor at the New York Fed, said in a statement. “However, new mortgages have slowed to pre-pandemic levels amid rising interest rates.”

The fourth quarter is likely to continue to yield higher credit card balances due to seasonal patterns and holiday shopping, New York Fed researchers said during a press call Tuesday. However, credit card balances decline in the first quarter, as seen in the first quarter of this year.

-Emma Okerman


(END) Dow Jones Newswires

11/15/22 1322ET

Copyright (c) 2022 Dow Jones & Company, Inc.

The Valley Voice
The Valley Voice
Christopher Brito is a social media producer and trending writer for The Valley Voice, with a focus on sports and stories related to race and culture.


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