Consumer debt in the U.S. has passed $17 trillion for the first time, according to a new report from the Federal Reserve Bank of New York.
American household debt reached a record $17.05 trillion during the first quarter of 2023, nearly $3 trillion more than the debt balance before COVID-19. Housing debt, which rose by $121 billion in the first quarter alone, accounts for over 70% of all debt.
Other results from the New York Fed’s report show that auto loans rose by $10 billion, student loan debt continues to rise, and credit card debt remains at an all-time high. The share of delinquent debt has risen in the last few months as well. This means that Americans are having a harder time paying off credit card bills, car payments, and house payments than they did last year.
Ted Rossman, a senior industry analyst for Bankrate, spoke to CNN and explained that more Americans are using credit cards to finance day-to-day necessities. This is not surprising considering American wages have been unable to outpace rising product prices.
“For the foreseeable future, we’re stuck with high credit card rates, high balances, and more people carrying debt. My advice would be to pay down credit card debt, as quickly and cost effectively as possible. I know it may be easier said than done, but 0% balance transfer cards are still abundant to pause that interest clock for up to 21 months.”Ted Rossman in an interview with CNN
The increase in American consumer debt can be attributed to a number of factors. Rampant inflation, along with the government’s response to combat it, has had devastating effects on American households. Annual wages have steadily declined over the last few years, a trend caused by the enormous government spending during the pandemic that increased inflation levels and decreased the value of the dollar. As the Federal Reserve continues to raise interest rates to fix this problem, debt levels rise for consumers who can’t keep up with their payments.
Being deep in personal debt is rarely a good decision. There are, of course, exceptions such as a business loan or a student loan for a worthwhile career. But the worst time for a person to be deeply in debt is during times of economic instability. By all available measurements, the U.S. is heading deeper into economic uncertainty. Americans should plan accordingly and practice cautiousness when making financial decisions for the foreseeable future.
This piece first appeared on TPUSA.