Americans’is on the rise despite high borrowing costs that may tick up further later this year and squeeze household budgets even more if the Federal Reserve follows through with anticipated interest rate hikes.
During the COVID-19 pandemic, consumer credit card loans dipped dramatically as the U.S. government injected stimulus into the economy to insulate consumers’ finances from the pandemic’s economic fallout.data shows that outstanding credit card debt fell from $858 billion in March 2020 to $736 billion in April 2021 – at which point it began a rebound that has seen credit card debt to $993 billion as of July 5, 2023.
Credit card debt reaching record highs comes as the Federal Reserve’s campaign of interest rate hikes aimed at tamping down inflation has pushed borrowing costs upward. According to LendingTree, the average credit card interest rate for U.S. credit cards is 24.06% as of July 10.
But high levels of credit card debt coupled with high-interest rates remain a risk for consumers should the economy slow, as rates will likely remain elevated through the year and growing credit card debt will require cardholders to pay more in monthly interest to carry balances forward on their cards.
The Federal Reserve's interest rate hikes have driven consumers' credit card rates higher, which could strain household budgets if the economy falters.Lenders are monitoring the situation and how economic conditions are affecting consumer credit. Executives from three of America’s largest banks discussed those issues during their respective earnings calls on Friday but noted that so far, consumers remain strong.
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