US household debt passed $16 trillion for the first time during the second quarter, the New York Federal Reserve said on Tuesday.
Even as borrowing costs rise, the NY Fed said credit card balances rose by $46 billion last quarter.
Over the past year, credit card debt has increased by $100 billion, or 13%, the largest percentage increase in more than 20 years. Credit cards typically charge high interest rates when balances are not fully paid off, making this an expensive form of debt.
“The consequences of inflation are evident in high loan volumes,” NY Fed researchers wrote in a blog post.
Not only are credit card balances rising, but Americans opened 233 million new credit card accounts during the second quarter, the most since 2008, the NY Fed report found.
Despite rising debt levels, the NY Fed said the consumer balance sheet appears to be in a “strong position” overall.
Most of the 2% quarter-over-quarter increase in US household debt to $16.2 trillion was driven by a jump in mortgage lending. Student loan balances were little changed at $1.6 trillion.
“Although the debt balance is growing rapidly, households have generally withstood the pandemic remarkably well,” the NY Fed said in the report, noting the unprecedented assistance from the federal government during the outbreak of Covid-19.
However, there are indications that some lower-income and subprime borrowers are now struggling to keep up with their bills.
“With the supportive policies of the pandemic mostly in the past, there are pockets of borrowers that are beginning to show some debt distress,” the report said.
Aided by moratoriums and forbearance programs, foreclosures remain “very low,” according to the report.
However, credit reports indicate that the number of new foreclosures increased by 11,000 during the second quarter, the NY Fed said, potentially signaling “the beginning of a return to more typical levels.”