PHILADELPHIA - If you want to understand the trends that have shaped the credit card debt industry over the last decade, you've come to the right place. Read on to learn more about America's average credit card debt, trends since COVID-19, and inflation's effect on delinquent accounts. Then, use the information in this article to make wise financial decisions. There's a good chance that you'll end up owing more than you're capable of paying off.
Average credit card debt in America in 2023
The average credit card debt in the U.S. reached an all-time high last year, reaching $930 billion in the fourth quarter. This figure increased by nearly nine percent over the next two years but was still less than half of the total household debt in 2023. According to the Federal Reserve, white non-Hispanic people are the most likely to have credit card debt. Meanwhile, Hispanic and black Americans' average credit card debt is $5,510.
As the housing market continues to cool, the balance on consumer credit cards is also rising. Mortgages and auto loans are the largest increases, while average credit card debt rose by $33 billion in the second quarter, on track with increases since 2011. The rising price of necessities like food, gas, and clothing is forcing Americans to use their credit cards more frequently and incur more debt to pay for them.
Even if consumer credit scores are not increasing, debt is increasing rapidly. The average credit card balance was only $430 lower than it was pre-pandemic. This rise is attributed partly to the fact that credit card issuers are spending more money on marketing campaigns and trying to get consumers to open accounts. This results in a vicious cycle that makes it difficult to break.
Trends since COVID-19
The COVID-19 event brought about a global economic shock of unprecedented proportions. This has resulted in steep recessions in many countries. It has particularly affected the poor, the youth, and women. It has also affected many industries, including those that rely on the services of others, such as hospitality and education. As a result, many of these sectors will face disruption and must adapt rapidly. Meanwhile, demand for new skills and education will increase.
While the global economy has benefited from the digital transition, many countries still lag behind in Internet connectivity. In sub-Saharan Africa, for example, the prevalence of internet connectivity is very low. However, 60 percent of businesses in sub-Saharan Africa use the internet for business purposes, and 85 percent of businesses in these countries use email for business. However, the digital divide is widening because of the wide variation in internet connectivity.
The COVID-19 pandemic has caused several changes in the global supply chain. As a result, some factories have been shut down, and the demand for food has soared. This has left the existing supply chain vulnerable because it lacks diversity, flexibility, and visibility. However, with the help of the latest technologies, a more resilient supply chain management system can be created.
Impact of inflation on credit card debt
Inflation and rising interest rates are two of America's biggest drivers of credit card debt. High inflation forces policymakers to raise interest rates, increasing borrowing costs. The increases are passed on to consumers and businesses, which end up paying more for existing debts. Higher interest rates also affect the credit ratings of consumers and businesses, making them less likely to be approved for new loans.
Inflation has also pushed up consumer prices. The Consumer Price Index, the most commonly used measure of inflation, rose by more than eight percent in the first half of 2017. In addition to this, gas prices increased more than 60 percent in the second quarter of this year, and the cost of clothing is five percent higher than it was a year ago. Consumers are not saving enough to keep up with these costs and often resort to credit cards to cover expenses.
Inflation is a factor in credit card debt in America, and the effects on consumers can be felt differently for different groups of people. For example, younger consumers and those with lower incomes are the most vulnerable to the effects of inflation. Inflation can also lead to higher credit utilization rates, making consumers more likely to miss minimum payments.
Impact of delinquency rates on delinquent accounts
Delinquency rates are one way to track the health of the economy. They show how much money consumers spend and their credit quality. In addition, they show how many consumers are paying late and the average amount. However, a rising number of people isn't good for the economy, as is reflected by the number of delinquent accounts.
The data on delinquency rates represent a snapshot of the economy's health, and delinquency rates may vary by region. As stimulus programs expire and local economies recover, there will be changes in these delinquency rates. The CFPB will continue to monitor delinquency rates and publish relevant insights as conditions change. For now, the outlook remains positive for consumer credit.
As of June 2020, auto loan and credit card delinquency rates will gradually start rising. While new delinquencies have risen over the past six months, the rate remains below the pre-pandemic levels.
