Rise in Credit Card Balances is the Largest in More Than 20 Years

Source: American Banker

The upswing in consumer borrowing marks the third straight quarter of notable increases in credit card balances. It comes just before the fourth quarter, when balances typically see their biggest jump thanks to holiday spending. At the same time, delinquency levels are also on the rise, a sign that more consumers are struggling to pay off their higher balances.

The trajectory of card balances moving forward depends on the pace of income gains in relation to inflation, researchers said. Income increases have so far failed to keep up with rapid price increases.

Credit card balances have been climbing steadily in 2022. In the second quarter, consumers added $46 billion in new debt to their cards. In 2020 and 2021, stimulus payments, unemployment benefits and savings on expenses such as commuting helped consumers pad their bank accounts and decrease their dependence on credit cards.