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Americans will accumulate more debt in early 2024, with more households falling behind on several types of loans, according to a New York Fed report released Tuesday.
In the first three months of 2024, total household debt soared to a new record of $17.69 trillion, an increase of $184 billion (1.1%) from the previous quarter. This increase was mainly due to a sharp increase in mortgage loan balances, which increased by $190 billion from the previous quarter to $12.44 trillion as of the end of March.
Auto loan balances increased slightly by $9 billion, the highest increase since 2020, and now stand at $1.62 trillion. But credit card balances fell by $14 billion to $1.12 trillion, near an all-time high, as consumers worked to pay down debt after the holiday season.
Latest New York Fed survey shows Americans expect high inflation to continue
A new rule from the Biden administration places an $8 cap on late payment fees on credit cards. (Photo by Matt Cardy/Getty Images/Getty Images)
The report also showed a notable increase in the number of borrowers struggling to make payments on credit cards, student loans, and auto loans.
About 3.2% of outstanding debt was in some stage of delinquency as of March, up from 3.1% in the previous quarter but still down from an average of 4.7% before 2019. COVID-19 pandemic Began. Transitions into delinquency, particularly serious delinquencies where the balance is 90 days or more past due, increased across all debt types.
“In the first quarter of 2024, rates of credit card and auto loan transitions into serious delinquency continued to rise across all age groups,” said Joel Scully, director of regional economics in the Household and Public Policy Research Department at the New York Fed. said. “We found that an increasing number of borrowers are falling behind on their credit card payments, worsening financial hardship for some households.”
Credit card delinquencies continued to increase from pre-pandemic levels in the first quarter. In fact, the percentage of credit card balances that are seriously delinquent has risen to its highest level since 2012.
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The increase in debt is of particular concern because: level of interest It is now at an astronomical height. His average annual percentage rate (APR) on credit cards has hovered around 20.66%, near an all-time high, according to the Bankrate database dating back to 1985. The previous record was his 19% in July 1991.
If people take on debt to cover higher prices, goods can become more expensive to buy in the long run. For example, if you owe $5,000, as the average American does, at current annual interest rates, it would take about 277 months and $7,723 to pay off your debt with minimal payments. Interest will be charged.
If people take on debt to cover higher prices, goods can become more expensive to buy in the long run. (license/image)
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Balance increase will occur after federal reserve He raised interest rates to the highest level in 23 years to tame inflation and cool the economy.
nevertheless inflation has subsided According to the latest data from the Labor Department, wages have risen 3.5% in recent months compared to the same period a year ago.
Rising inflation is putting severe financial pressure on most American households, forcing them to pay for necessities like food and rent. The burden falls disproportionately on low-income Americans, whose already maxed-out paychecks are heavily affected by price fluctuations.
