Americans' reliance on credit cards has led the nation to a collective debt of $1.12 trillion, according to recent data from the Federal Reserve Bank of New York. This alarming figure was reported on Tuesday, underscoring the growing financial pressures on U.S. households.

The average credit card balance per consumer now stands at $6,218, marking an 8.5% increase from the previous year, as found in a report by credit reporting agency TransUnion. "Consumers continue to use credit, and in particular credit cards, as they navigate the world we face right now," said Charlie Wise, TransUnion's senior vice president of global research and consulting.

In the face of higher prices and interest rates, many Americans are struggling to keep up with their payments. The New York Fed and TransUnion have both reported a rise in credit card delinquencies. The New York Fed noted that approximately 8.9% of credit card balances transitioned into delinquency over the last year, while TransUnion identified "serious delinquencies," accounts 90 days or more past due, reaching levels not seen since 2010.

The fourth quarter of 2023 also saw the opening of an additional 19.3 million new credit accounts, with a significant portion attributed to subprime borrowers—those with a credit score of 600 or below.

Kassandra Martinchek, a senior research associate at the Urban Institute, offered a cautionary perspective: "Although access to credit and loans can provide a lifeline for families struggling to meet basic needs, relying too much on these financial coping strategies may lead to financial instability if families have a hard time keeping up with debt or do not recover from using savings not intended for routine expenses."

The cost of borrowing on credit cards remains high with the average credit card interest rate at a near-record 20.66%, according to Bankrate. Ted Rossman, Bankrate's senior industry analyst, stressed the urgency of addressing credit card debt, which is likely the most expensive debt for many households.

The current state of credit card debt in the U.S. is a matter of concern, with rising delinquencies and high-interest rates emphasizing the need for individuals to carefully manage their credit card use. The potential future implications of this trend could impact the broader economy and the financial health of American consumers.

CNBC Article