Americans’ debt exceeds $17 trillion for the first time

Minneapolis (CNN) American debt levels It continues to climb to new heights at a time when economic conditions are becoming increasingly less stable.

Household debt stocks hit a new record of $17.05 trillion during the first quarter, up $148 billion or 0.9% from the fourth quarter of last year, Federal Reserve Bank of New York I mentioned Monday.

This debt burden has increased by $2.9 trillion since the end of 2019.

During the first quarter, increases in debt were seen across nearly all categories, with larger balances (and a new record) for Mortgageshome equity lines of credit auto loans Student loansAnd retail cards and other consumer loans.

Notably, credit card balances were flat — settling at $986 million — during the first quarter, and appear to be an exception; However, New York Fed researchers said this is the first time in more than 20 years that there has not been an outright drop in this category.

The first three months of the year usually bring credit cards a bit of a break after Heavy vacation workout Where consumers cut back on spending and pay off some debt with the help of New Year’s resolutions or tax refunds.

This did not happen this time.

“The fact that they didn’t fall in the first quarter of this year doesn’t bode well for the rest of the year,” said Matt Schulz, senior credit analyst at LendingTree.

The effects of strong spending

to this point, credit card debt It was rising at the fastest pace of any debt covered in the report, said Ted Rossman, Bankrate’s chief industry analyst.

“I think this reflects more people using credit cards to fund everyday necessities (although there is also an element of using less cash and more people using cards for convenience and rewards and getting paid for them right away),” Rossman noted, noting that Bankrate research shows that 46 % of cardholders take on monthly debt, with 54% paying in full. Last year, 39% carried debt from month to month.

The primary culprits, Schulz said, are inflation, increased spending since the pandemic, and typical consumer behavior. He added that increases in credit card debt can be either a sign of trust or conflict.

“Except in times of economic disaster, such as the onset of a pandemic or the Great Recession, credit card debt continues to grow,” Schulz said. “These two events are the only times in decades that we’ve seen a meaningful decrease in credit card debt.”

Despite debt rising to new highs, households on average are managing their obligations effectively: the share of current debt that is in arrears has increased across most types of debt; For the most part, however, they remain below pre-pandemic levels, according to the New York Federal Reserve Bank report. Delinquency rates fell sharply at the beginning of the epidemic.

the The refinancing boom helped the financial situation of families, New York Federal Reserve Bank researchers note. During the pandemic, 14 million mortgages were refinanced, allowing $430 billion in real estate equity to be extracted through cash refinancing. About 64% of these measures were homeowners’ refinances at a lower rate, which allowed for an average payment reduction of $220 per month, according to the researchers.

“The mortgage refinancing boom is over, but its impact will be felt for decades to come,” Andrew Huot, director of family and public policy research at the Federal Reserve Bank of New York, said in a statement. “As a result of the dramatic reductions in equity, subprime borrowers have reduced their annual payments by tens of billions of dollars, providing additional financing for spending or payments in other debt classes.”

Warning signs

However, this latest batch of household data does carry some troubling signs, as noted by researchers and analysts from the Federal Reserve Bank of New York.

Car loan arrears For younger borrowers, those under 40 have surpassed pre-pandemic levels. With car inflation soaring, the average payment hovers around $700 a month, Rossman said.

“For some people, paying the car may be competitive with the amount of rent; but again, [rent] It went up so much that I think it’s this cumulative effect, said Rossman. “Rising prices on a lot of things, higher interest rates: I feel like these trends are colliding in a negative way, unfortunately, for a lot of families.”

In addition, this report does not fully reflect Impact and debt loads of buy it now pay later Installment loans, New York Federal Reserve researchers note.

And student loans—one area where some Americans have been getting breathing space in part because of pandemic-era stress programs—may be another shoe drop at a time when recession fears and other macroeconomic concerns (such as Banking turmoil or the current debt ceiling crisisSchulz said) looms.

“There’s never a great time to be in debt, but it’s worse when there’s a lot of uncertainty,” he said.

For highly indebted consumers, there is an upside to higher savings rates, Schulz said.

There are other ways, Rossmann said, too.

“For the foreseeable future, we’re stuck with high credit card rates, high balances, and more people carrying debt,” he said. “My advice is to pay off credit card debt as quickly and cost-effectively as possible. I know that may be easier said than done, but 0% balance transfer cards are still plenty to pause that interest clock for up to 21 months.”

He added, “Chances are, if you have credit card debt, it’s your highest interest rate by a wide margin, so I really think that needs to be a priority.”