The New York Federal Reserve said on Tuesday that US household debt exceeded $16 trillion for the first time ever during the second quarter.
Even as borrowing costs rose, the New York Fed said credit card balances increased by $46 billion in the last quarter.
Over the past year, credit card debt has jumped $100 billion, or 13%, the largest percentage increase in more than 20 years. Credit cards usually charge high interest rates when the balances are not paid in full, making this an expensive form of debt.
“The effects of inflation are evident in large borrowing volumes,” New York Fed researchers wrote in a blog post.
Not only were credit card balances up, but Americans opened 233 million new credit card accounts during the second quarter, the most since 2008, according to a New York Fed report.
Despite rising debt levels, the New York Fed said consumers’ balance sheets appear to be in a “strong position” overall.
Most of the 2% quarter-on-quarter increase in US household debt to $16.2 trillion was driven by a jump in mortgage borrowing. Student loan balances were slightly changed at $1.6 trillion.
“Although debt stocks are growing rapidly, households in general have weathered the pandemic well,” the New York Fed said in the report, noting the unprecedented assistance from the federal government during the onset of Covid-19.
However, there are hints that some low-income mortgage borrowers are now struggling to keep up with their bills.
“With mostly pandemic-supportive policies in the past, there are pockets of borrowers who are beginning to show some distress with their debts,” the report said.
According to the report, foreclosures remained “extremely low” with the help of deferment and forgiveness programs.
However, credit reports indicate an increase in the number of new foreclosures by 11,000 during the second quarter, the New York Fed said, likely signaling “the beginning of a return to more typical levels.”