The sum of the nation’s credit card debt surpassed $1 trillion for the first time this week, according to the Federal Reserve Bank of New York. The milestone coincides with the downgrade of the nation’s credit rating and ongoing concerns about the health of the American economy.
The news from the central bank branch represented an increase of almost 5% from the previous quarter. Furthermore, the previous quarter’s increase was an even higher 17% increase.
In addition to the high level of overall debt, the Federal Reserve estimated that the number of accounts that are at least 30 days late increased by more than 7% last quarter. The figure represents the largest such increase in more than a decade.
The Fed also estimated that the number of Americans in debt delinquency increased by more than 5% in the last quarter.
One factor driving the increase in credit card debt is that many American households have seen their real incomes decline in the previous several years when adjusted for inflation.
CNN: "For the first time in history, credit card debt for Americans has hit $1 trillion".
That’s “Bidenomics” for you!!! pic.twitter.com/8SWr35baXJ
— Proud Elephant 🇺🇸🦅 (@ProudElephantUS) August 8, 2023
The central bank’s estimates also found that Americans hold more than $1.5 trillion in car loans and a similar amount in student loan debt.
Overall household debt currently stands at about $17 trillion.
The debt news came just one week after the financial institution Fitch Ratings lowered the United States’ credit rating from AAA to AA+, representing only the second such decline in American history.
The news sent stocks lower last week.
Furthermore, Moody’s also lowered the credit ratings of a number of American banks.
Ten banks saw their rating decline, including Capital One and Citizens Financial. In addition, a number of other financial institutions are under review for a possible downgrade, including Bank of New York Mellon and U.S. Bancorp.
Analysts for Moody’s wrote that American banks “continue to contend with interest rate” risk and the “wind-down of unconventional monetary policy” which “drains systemwide deposits and higher interest rates depress the value of fixed-rate assets.”