For the first time since it began keeping records, the Federal Reserve Bank of New York said consumer credit card debt passed the $1 trillion mark during the second quarter of the year. File Photo by Peter Foley/EPA
Aug. 8 (UPI) -- For the first time since it began keeping records, the Federal Reserve Bank of New York said Tuesday that U.S. consumers are carrying a collective $1 trillion in credit card debt.
The New York Fed said credit cards were the largest, single source of consumer debt, increasing by $45 billion during the second quarter to stand at $1.03 trillion.
"After a sharp contraction in the first year of the pandemic, credit card balances have seen seven quarters of year-over-year growth," the bank's report read. "The second quarter of 2023 saw a brisk 16.2% increase from the previous year, continuing this strong trend."
The report masks what would otherwise be seen as positive news for the U.S. economy, the world's largest. The Conference Board in its final report for July said consumer confidence was at its highest level in two years, recording two consecutive monthly gains.
Consumer-level inflation, meanwhile, is down sharply from year-ago levels, though Moody's Investor Service put several banks on notice and warned of a mild recession for the U.S. economy.
Higher lending rates, meant to curb inflation, are making borrowing more prohibitive, however. But borrowing and high credit card balances are just one of the concerns.
"Delinquency rates have now returned to pre-pandemic levels," the New York Fed noted.
Lower-income households saw the brunt of the pressure earlier this year. The Supplemental Nutrition Assistance Program, or SNAP, included emergency allotments under provisions enacted in March 2020, just as the spread of COVID-19 was entering the pandemic stage.
Those emergency allotments ended March 1. The U.S. Center on Budget and Policy Priorities estimated the average individual recipient saw SNAP support decline by $90 a month and as much as $250 in some cases.
It wasn't all bad news from the New York Fed. Even with mounting debt, there are few signs of a major financial disaster for consumers.
"However, rising balances may present challenges for some borrowers, and the resumption of student loan payments this fall may add additional financial strain for many student loan borrowers," it said. "Even so, thus far, household credit shows some early signs of stabilizing at pre-pandemic health, albeit with higher nominal balances."