Americans' credit card debt reached a new high this summer, according to a new report from the New York Federal Reserve released Tuesday.
Credit card balances rose by $45 billion in the second quarter, according to the report, resulting in a peak $1.03 trillion. In the first quarter, that number was $986 billion, making this a 4.6% increase. That increase came alongside an increase in total household debt over the same period to $17.06 trillion.
"Credit card delinquencies continue an upward trend, a growing sign that consumers are feeling the pinch of high prices and lower savings balances than they had just a few years ago," Elizabeth Renter, data analyst at NerdWallet, said in response to the NY Fed's report, according to CNBC.
Inflation has been easing in recent months but is still a factor for Americans.
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David Payne of Kiplinger explained, "The easing mostly happened because big price increases that happened just over a year ago are no longer in the year-over-year calculation, but there has been a gradual slowing of monthly price pressures since the beginning of 2023, as well." Food prices, for example, are still generally high, but the price increases on those categories are slowing down.
Meanwhile, the Federal Reserve continued raising interest rates in July in its continued attempt to combat inflation. That means that interest rates on credit cards have also been on the rise, making it even more important to pay off credit card debt.
Strategies to pay off credit card debt
To pay off credit card debt, Kiplinger recommends taking a few steps:
- Find your credit score to be able to assess your options
- Figure out the extent of your debt like by using a spreadsheet to see the combined balances on multiple credit cards. This accounting should also include the interest rate on each card
- Choose the right approach to pay off your debt. This could be the "avalanche" approach, beginning with cards with the highest interest rates and balances, the "snowball" approach, beginning with paying off low-balance debts first to fuel your motivation, or the "blizzard" approach, where you start with a snowball and move to the avalanche
If you are working through credit card debt, as the data shows, you're clearly not alone. This New York Fed report comes shortly after a WalletHub study said American credit card debt was over $1.1 trillion.
That study further said that Alaska ranked first as the state with the highest credit card debt, followed by the District of Columbia and Colorado. Each had a median credit card debt of over $3,000.
