American households are drowning in credit card debt, with average balances surpassing $10,000 as economic pressures mount.
At a Glance
- Average American household credit card balance in Q3 2024: $10,757
- Total U.S. credit card debt: $1.29 trillion
- Q3 2024 credit card debt increase: $21 billion
- Nearly half of Americans still carry debt from last year’s holiday season
- 68% of respondents expect to spend less on holiday shopping due to inflation
Credit Card Debt Reaches Alarming Levels
A recent study by WalletHub reveals a troubling trend in U.S. consumer finances. By the third quarter of 2024, the average American household carried a staggering $10,757 in credit card debt when adjusted for inflation. This figure represents a significant burden on families already grappling with economic challenges.
Despite a 31% smaller increase compared to the previous year, the overall debt remains critically high at $1.29 trillion. This substantial sum underscores the financial strain many Americans are experiencing in the current economic climate.
“Even though that third-quarter increase was 31% smaller than last year’s and total debt is just 3% above where it was last year after adjusting for inflation, we are still in fairly dangerous territory,” said WalletHub editor John Kiernan.
US serious delinquencies are skyrocketing:
The share of US credit card debt that is delinquent 90+ days jumped to 11.1% in Q3 2024, the highest level since 2011.
This is the 5th consecutive quarter of increases, the longest streak since the 2008 Financial Crisis.
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Factors Contributing to Rising Debt
Several factors are driving the increase in credit card debt. Sharp interest rate hikes have made it more expensive for consumers to carry balances. Additionally, increased holiday spending has contributed to the debt surge, as many Americans rely on credit cards to finance their seasonal purchases.
Persistent economic pressures continue to squeeze household budgets, forcing many to rely on credit cards for everyday expenses. This reliance on credit is setting the stage for potential financial hardships in the future.
Holiday Spending Exacerbates the Problem
The holiday season typically sees an uptick in consumer spending, but this year’s data paints a concerning picture. Nearly half of Americans are still carrying debt from last year’s holiday season, highlighting the long-term impact of credit card use for seasonal expenses. A survey indicates that 68% of respondents anticipate spending less on holiday shopping due to inflation, with about a third planning to reduce their expenditures compared to 2023. Despite these intentions to curb spending, many Americans are still expected to increase their credit card debt due to holiday purchases, potentially exacerbating the already precarious debt situation.
Strategies for Managing Credit Card Debt
As credit card balances continue to rise, financial experts recommend several strategies for managing and reducing debt. One effective approach is to transfer balances to credit cards offering low or zero percent APR. These promotional periods, which can last up to 21 months, provide consumers with an opportunity to pay down their debt faster and save money on interest charges.
However, it’s important to note that most balance transfer cards charge a fee of about 3%, although some may waive this fee. Consumers should carefully consider the terms and conditions of these offers before proceeding.
As Americans navigate these challenging economic times, it’s crucial to prioritize financial responsibility and seek professional advice when needed. The current levels of credit card debt serve as a stark reminder of the importance of careful budgeting and strategic financial planning.
