Credit card balances reach record $866B as consumers battle economic headwinds
Average credit card debt per borrower rose to $5,474 from $4,857 over the past year
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Credit card and personal loan balances have reached record highs in recent months as an increasing number of consumers lean on such means to combat growing financial pressures caused by sky-high inflation.
According to TransUnion's Quarterly Credit Industry Insights Report (CIIR), bankcard balances rose 19% during the third quarter from a year ago, reaching a record $866 billion. This was driven heavily by a growth in Gen Z and Millennial borrowers whose balances increased 72% and 32%, respectively, according to the report.
At the same time, private label total and average credit lines have reached record highs as well as the average number of accounts per consumer, according to the report, the consumer credit reporting agency said.
MORE AMERICANS RACKING UP CREDIT CARD DEBT AS INFLATION RAGES
This increase is caused by the myriad of economic challenges facing consumers from "this environment of high inflation, and secondarily by the higher interest rates that the Federal Reserve is implementing to tamp it down," Michele Raneri, vice president of U.S. research and consulting at TransUnion, said in a statement.
Fan of plastic credit cards is in woman's hand. Bank's favorable offers for consumers concept (iStock / iStock)
INFLATION ROSE FASTER THAN EXPECTED IN AUGUST, KEEPING PRICES PAINFULLY HIGH
Overall, number of credit cards issued over the third quarter rose to 510.9 million, up from 474.2 million during the same period a year ago. Meanwhile, the average credit card debt per borrower rose from $4,857 to $5,474.
The number of consumers that have access to a personal loan also rose from 19.2 million to 22 million, according to the data. The average personal loan debt per borrower is just over $10,700, according to the data. This time a year ago the average personal loan debt per borrower was $9,387.
Delinquencies – meaning late monthly payments – have also been rising over the past year and already passed pre-pandemic levels, according to the report.
A woman holding credit cards. (iStock / iStock)
"Unsecured personal loans have seen record growth in originations and balances in recent quarters. This growth has been fueled, in part, by significant increases in lending to below prime risk tiers," the report said. "This increase, combined with a general deterioration in the financial health of subprime consumers as a result of elevated inflation, has led to an increase in delinquencies, which have now surpassed pre-pandemic levels."
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However, as long as "employment numbers remain strong, there should continue to be a steady flow of customers seeking access to new credit products, credit cards and personal loans in particular, "according to Raneri.
There will also be "an ample supply of lenders willing to offer credit to them," Raneri added.
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This means we will likely see continued growth in credit card usage especially as "increased interest rates and inflation continue to put pressure on consumers," according to Paul Siegfried, senior vice president and credit card business leader at TransUnion.