How much do U.S. consumers owe on their credit cards? – Deseret News

U.S. borrowers have struggled amid high interest rates and rising prices.

U.S. household debt hit a new record in the first quarter of 2024, increasing by $184 billion to $17.69 trillion. Nearly 1 in 10 credit card balances and 1 in 12 auto loans are delinquent, according to the New York Federal Reserve's quarterly report on household debt and credit released this week.

“Severe delinquency rates for credit cards and auto loans continued to rise across all age groups in the first quarter of 2024,” Joelle Scally, regional economic director for the Household and Public Policy Research Department at the Federal Reserve Bank of New York, stated. “An increasing number of borrowers are missing credit card payments, indicating worsening financial distress for some households.”

Mortgage loan balances also increased by $190 billion from the previous quarter, reaching $12.44 trillion as of the end of March.

According to the advisory, “Home equity line of credit (HELOC) balances increased by $16 billion, marking the eighth consecutive quarter of growth since the first quarter of 2022, and now stand at $376 billion. Credit card balances decreased by $14 billion, to $1.12 trillion. Other balances, including retail cards and consumer loans, also fell by $11 billion. Auto loan balances increased by $9 billion, continuing an upward trend from 2020 and now stand at $1.62 trillion.

The New York Fed reported that 3.2% of outstanding debt was in some stage of delinquency as of the end of March.

Debt Demographics

An article on the Liberty Street Economic Blog pointed out that “younger credit card users and those living in low-income areas are more likely to have their credit cards maxed out than others.” The post states, “The share of borrowers has increased from pandemic lows and is approaching pre-pandemic levels, and the delinquency transition rate for these borrowers is now significantly higher than pre-pandemic, resulting in higher transition rates. “. Overall credit card delinquency rate. “

Speaking of those carrying credit card balances, Bankrate's Ted Rossman told NPR, “Credit card debt is very costly, with average interest rates as high as 20 percent. Borrowers who make only the minimum payment each month may need to pay nearly two It takes ten years to pay off the debt, with the average balance being $6,360 and interest alone totaling $9,500.

Investopedia reports that as of the end of 2023, the average annual credit card interest rate will be 21.47%, which is a “significant increase” from the average interest rate of 15.05% in 2019. “Higher interest rates can make it harder to pay off a balance because more of the monthly minimum payment goes toward interest rather than principal.”

Who has the most credit card debt?

According to Investopedia, Generation X makes up the largest share, accounting for nearly 34%. Millennials account for more than 29% of credit card debt, followed by baby boomers at nearly 27%. Gen Z holds just over 6% of the blame, while the silent generation holds less than 4%.

“To a large extent, this reflects the current peak consumption period of each generation,” the article said.

repay loan

If you're in debt, don't worry. Bank of America says there are smart ways to pay off debt, and the bank offers four strategies to speed up the process:

  • Target one credit card at a time. You still have to pay at least the minimum amount on each card, but focus on paying off the balance on one card so you can pay off that debt. The company says you can focus on high-interest debt first, or pay off the debt with the smallest balance, and then add the amount you pay to the amount you pay on the card with the second-highest balance.
  • Pay more than the minimum. Your credit card statement will tell you how long it will take to pay off your debt if you only pay the minimum amount. If the balance is high, it may take many years. Pay more and you'll save on interest.
  • consolidate debt. Consolidate higher-interest debt into lower-interest debt so you can pay off your debt faster and pay less interest. The company recommends transferring your balance (be aware of balance transfer fees) or taking out a home equity loan, which may have a lower interest rate.
  • Understand your spending and then look for ways to cut back. Use the money you save to pay down debt.

CBS News explains two popular strategies for paying off debt faster.

In the “snowball” method, you pay off the smallest debt first. Financial experts say paying off debt, even if it's not the highest-interest debt, can provide a psychological boost. Then you can move to the next smallest one.

The “avalanche” approach hits debt with the highest interest rates first, which will reduce the amount of interest paid over time.

In both cases, you'll also need to continue making all minimum payments. You then add the debts you paid back to the amount you paid so that you can pay more and more on each debt and pay them off faster.

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