Credit card debt skyrockets to a record $1.14 trillion

Americans’ credit card debt levels have surpassed $1 trillion, according to data released by the Federal Reserve Bank of New York.

Transcript

00:00So there's a new survey out from the Federal Reserve Bank of New York.

00:05It says that Americans now owe a record $1.14 trillion on their credit cards.

00:12What do you make of that?

00:13Half of cardholders pay their bills in full every month.

00:16So while they're counted among these balances, they don't really have debt,

00:20not in the sense of paying interest every month.

00:23The average credit card, by the way, charges about 21%.

00:26So if you're in the half that is paying interest, that's a really big deal for you.

00:31There's a take on these credit card balance numbers that showcases an expanding economy,

00:36more credit card usage, less cash.

00:39It's not all bad.

00:40What is bad is lugging around $6,000 in credit card debt at 21% interest

00:46for years and years and years.

00:48And I'm giving about the average stats there.

00:51Minimum payments in that average scenario keeps you in debt for 18 years

00:55and costs you about $9,500 in interest.

00:58So if you're among those with credit card debt, you've got to prioritize payoff.

01:02Get a 0% balance transfer card or work with a reputable nonprofit credit counselor.

01:08Big picture, though, the credit card market's in good shape.

01:12You know, yeah, delinquencies have gone up and debt's gone up.

01:15Lenders are feeling pretty good about things and credit is still flowing freely.

01:19The trouble is more on the margins.

01:21It's people with lower incomes, lower credit scores.

01:24We don't want to minimize that pain.

01:26I mean, that is significant at the individual level.

01:29The macro, though, is more positive.

01:31So when you hear a number like that, $1.14 trillion worth of credit card debt,

01:36is that a reason for you to be concerned?

01:40In and of itself, it's not a reason to be concerned.

01:43I know it sounds like a big number, and it is.

01:46Remember, though, it reflects balances, so half of those are paid off every month in full.

01:51There is a take on this that is more economic growth, more card usage, higher population.

01:57In many respects, we would actually expect credit card balances to grow over time.

02:02It usually takes something pretty exceptional for them to fall,

02:06like the COVID pandemic or the Great Recession before that.

02:10Otherwise, credit card balances pretty much steadily march up and to the right.

02:14But what's important is the individual level.

02:17You want to be one of the transactors.

02:19You want to be somebody who's using a card for rewards and convenience

02:23but paying it off at the end of the month.