Credit Card Debt reaches $1 Trillion
For the first time on record, credit card debt has surged past $1 trillion, driven by high-interest rates and increasing delinquencies, notably among young borrowers. Total balances on credit cards and other revolving accounts reached $1 trillion the week of July 26, up from $998 billion the prior week, according to reports from the Federal Reserve Bank of St. Louis.
The $1 trillion milestone marks an increase of $193.4 billion since the beginning of the year and a staggering $264 billion above the level seen in April 2021, during the onset of the pandemic.
A recent article from Yahoo Finance notes that this milestone signals potential financial challenges. As rates near 40-year highs, credit card holders face intensified strain, especially the youngest age group, with over 8.5% at risk of serious delinquency. With the end of federal student loan forbearance looming, individuals might turn to credit cards for support, exacerbating the issue.
According to Bankrate, just 54% of US credit card holders pay their balances in full every month, meaning that 46% carry their debt and are, therefore, paying more in interest than ever before.
With account default rates rising, creditors also face more challenges with managing defaulted consumer credit accounts. Read more about how EverChain helps creditors to maximize the value of their defaulted portfolios while maintaining tight control over the treatment and satisfaction of consumers post-sale. Or schedule a free consultation here.