As Americans’ pandemic-era savings continue to dwindle, they’re relying more and more on credit cards.
The average American has $6,329 in credit card debt, up 6% from $5,947 a year earlier, according to TransUnion’s second-quarter Credit Industry Insights Report. Those with credit scores at or below 719 are particularly bearing the brunt of inflation, showing higher balances and credit utilization, said Paul Siegfried, senior vice president and credit card business leader at TransUnion.
Take a look at last quarter’s U.S. credit card usage, by the digits.
- $1.05 trillion: Total credit card balances. This was the third consecutive quarter where this figure topped $1 trillion, according to TransUnion.
- 1.12%: The consumer-level delinquency rate, up from 0.89% in the same quarter a year prior.
- 545 million: The total number of credit cards in the U.S.
- 8.6%: Year-over-year growth in card balances.
Consumer spending has remained strong in the face of higher prices everywhere, from the grocery store to the housing market. A sizable chunk of that spending can be attributed to rising credit use. Bank card balances grew 4.8% from a year ago, led by those with lower credit scores, TransUnion found.
The rise in credit card usage has added to the growing debt pile being shouldered by many Americans. Aggregate household debt balances hit $17.8 trillion in the second quarter, according to the Federal Reserve Bank of New York’s latest Household Debt and Credit Report. That figure has grown by $3.7 trillion since the end of 2019, prior to the pandemic recession.
That has meant that delinquencies are also growing. Over the last year, approximately 9.1% of credit card balances transitioned into delinquency, the New York Fed said in its report. TransUnion also expects delinquency rates, or the proportion of payments more than 30 days overdue, to rise during the rest of the year, although at a slower pace.
Credit card originations — the process by which a lender approves customers for a new credit product, which includes loans, mortgages, and credit cards, and performs initial processing — were also down 7% year-over-year.
These originations will likely continue to decline for customers with lower credit scores, as issuers turn to “less risky borrowers,” Siegfried said. The only consumer segment that saw growth in this area was the “super prime,” or those with credit scores of 720 and up, in the first quarter — a sign that banks and other lenders are looking for customers that they can trust to pay off their balances.