American Consumers Added $67.1 Billion to Credit Card Debt in Q2
As 2022 rolls on, American consumers are now piling on more credit card debt. According to the latest Credit Card Debt Study from WalletHub, credit card debt among U.S. adults increased by $67.1 billion during the second quarter of 2022. That marks the largest increase seen during a Q2 and is 50% higher than the $44.9 billion in debt consumers added in Q2 2021.
Furthermore, the site notes that the figure is 3.5x higher than the second quarter average observed since the end of the Great Recession. This recent spike follows a Q1 that saw a payoff dip of just $12.5 billion. In turn, WalletHub is now projecting that consumers will end 2022 with $110 billion more in credit card debt than they entered the year with.
Offering insight into the new report, WalletHub analyst Delaney Simchuck explained, “Credit card debt levels are rising at a record pace in large part due to the combination of high inflation, pent up demand, and consumers settling back into bad habits from before the pandemic. Many people have let their guard down after pinching pennies at the height of the pandemic, especially given the record employment levels we’re currently enjoying.”
Additionally, Simchuck went on to note, “The latest credit card debt statistics indicate that the average U.S. consumer’s financial situation has the potential to get much worse before getting better. As unemployment rates start to rise, people will find themselves with more and more debt, and if prices remain high, a lot of us will have trouble making ends meet.”
The rise in consumer debt also comes as the Federal Reserve has been aggressively raising interest rates. In turn, the credit card debt that Americans carry is likely to cost them more in interest. Moreover, despite already hiking rates four times this year, the Fed is widely expected to increase them by 75 basis points next week. If they do so, it’d be the third such consecutive rise following identical increases in June and July. As WalletHub writes, the anticipated rate hike alone would cost consumers carrying debt $5.3 billion in the next year in addition to the $15.3 billion incurred by this year’s previous upwards adjustments.
It seems that the current state of consumer debt is yet another piece of what’s proving to be a complicated economic puzzle as of late. Although the added spending is good for spurring gross domestic product (which has been lackluster for multiple quarters), the debt that consumers incur can become unsustainable. In fact, with the likely interest rate hike ahead, credit cardholders could soon be paying more to carry their balances. Ultimately, should current trends continue, credit card debt could prove to be a much larger issue in future quarters — especially if the United States does end up in a recession.