Americans now owe a record $1.14 trillion in credit card debt, according to a new report from the Federal Reserve Bank of New York. Credit card balances surged by $27 billion in the second quarter of 2024, marking a 5.8% increase compared to the previous year.

Delinquency rates have also risen, particularly among younger adults aged 18 to 39, who were likely more severely impacted by the COVID-19 pandemic. These younger borrowers may have overextended their finances during the pandemic, leading to higher delinquency rates. The New York Fed noted that delinquent borrowers often have shorter credit histories, lower credit limits, and are more likely to be renters, making them financially vulnerable.

The report found that approximately 9.1% of credit card balances became delinquent over the past year. This financial strain is compounded by the fact that many millennials, who are now facing delinquency, entered the workforce during the Great Recession. The economic downturn they faced at the start of their careers has had lasting effects on their earning potential.

A separate survey by Achieve revealed that 57% of consumers rely on credit cards to make ends meet, with 36% struggling to pay recurring debts on time. Job losses or reduced income were cited as the primary reasons for missed payments. Additionally, Bankrate reports that half of cardholders now carry debt from month to month, a trend exacerbated by high inflation and interest rates.

Credit cards have become increasingly expensive, with rates climbing as the Federal Reserve raised interest rates to combat inflation. The average credit card rate now exceeds 20%, near an all-time high, placing a significant burden on lower-income households. Financial experts stress the importance of paying down credit card debt quickly to avoid costly long-term interest.

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