Total household debt reached $17.06 trillion in Q2 2023 amid surges in credit card balances, according to findings from the Federal Reserve.
08/11/2023 10:25 A.M.
3.5 minute read
The Federal Reserve Bank of New York’s Center for Microeconomic Data released its Quarterly Report on Household Debt and Credit this week, detailing trends in household borrowing and indebtedness, including data about mortgages, student loans, credit cards and auto loans.
The report found that the second quarter of 2023 saw household debt increase by $16 billion, or 0.1%, bringing the total household debt to a staggering $17.06 trillion.
Additionally, a notable highlight from the Fed’s report is the remarkable growth in credit card balances, which surged by $45 billion in just one quarter. This increase pushed the total credit card debt to exceed the $1 trillion mark, standing at an all-time high of $1.03 trillion. This upward trajectory signifies a 4.6% quarterly surge in credit card balances, as well as an expansion of 5.48 million credit card accounts. Aggregate credit card limits also rose by $9 billion, currently resting at an impressive $4.6 trillion.
“Credit card balances saw brisk growth in the second quarter,” said Joelle Scally, regional economic principal within the Household and Public Policy Research Division at the New York Fed. “And while delinquency rates have edged up, they appear to have normalized to pre-pandemic levels.”
Mortgage balances, on the other hand, experienced a period of stability during the same quarter, remaining largely unchanged at $12.01 trillion. This stability was attributed to declining mortgage originations and a slowdown in home prices. Meanwhile, other balances, encompassing retail cards and various consumer loans, showed a positive increase of $15 billion.
Conversely, auto loans continued their upward trajectory, with balances surging by $20 billion. This trend has been consistent since 2011, with newly originated auto loans reflecting a value of $179 billion. Despite the high dollar value of newly issued auto loans, the number of opened loans remains below pre-pandemic levels. In contrast, student loan balances experienced a decline of $35 billion, bringing the total outstanding student debt to $1.57 trillion.
Additionally, delinquency rates remained relatively steady throughout Q2 2023, indicating a continued stabilization after a sharp decline since the onset of the pandemic. However, there was a mild increase in the share of debt transitioning into delinquency for credit cards and auto loans, with transition rate increases of 0.7 and 0.4 percentage points, respectively. This shift in credit card balance performance marked a noteworthy change from the extraordinary lows observed during the pandemic.
Credit Card and Student Loan Trends
The New York Fed also issued an accompanying Liberty Street Economics blog post examining trends in credit card lending and repayment.
The blog found that despite rising inflation, “there is little evidence of widespread distress on households,” according to the release.
Additional trends from the report include:
Housing Debt
- There was $393 billion in newly originated mortgage debt in Q2 2023, reflecting a modest increase in purchase originations as refinance originations have slowed.
- About 39,000 individuals had new foreclosure notations on their credit reports, a very small increase from the first quarter. New foreclosures have stayed even since the CARES Act moratorium was lifted.
Student Loans
- Outstanding student loan debt stood at $1.57 trillion in Q2 2023.
- Federal student loan payments remain suspended until October 2023 and missed payments on federal student loans will not be reported to credit bureaus until Q4 2024. Because of these policies, less than 1% of aggregate student debt was reported 90+ days delinquent or in default in Q2 2023.
Read the New York Fed’s quarterly report and the Liberty Street Economics blog post for more findings.
ACA’s Take
The accounts receivable management (ARM) industry is instrumental in keeping America’s credit-based economy functioning with access to credit at the lowest possible cost.
Research such as this from the New York Fed, academics and regulators reflects the industry’s integral role in maintaining a healthy economy and is helpful in ACA’s advocacy efforts to show that overly restrictive regulations on the collection process have led to a decrease in available credit for consumers.
The New York Fed’s quarterly report is also helpful in ACA’s advocacy efforts to demonstrate how proposed regulations and laws on wage garnishment impact consumers’ overall access to credit based on where they live, their credit score and other demographics.
Remember, subscribe to ACA Daily and Member Alerts under your My ACA profile when logged in to acainternational.org to receive updates on the ACA Huddle.