Household debt in the United States has surged to a new record high of $18.04 trillion, according to a report released Thursday by the Federal Reserve Bank of New York. This includes credit cards, mortgages, auto loans, and student loans, marking a significant increase in Americans’ overall financial obligations.
Debt levels rose by $93 billion in the last quarter of 2024 alone, with nearly half of that increase coming from credit card debt. The report also revealed that total credit card balances have now reached an unprecedented $1.21 trillion, underscoring the growing reliance on borrowed funds to cover expenses.
Credit card debt and interest rates continue to climb
Experts at the New York Federal Reserve noted that credit card debt typically rises during the final months of the year due to holiday shopping. However, they anticipate a decline in balances early in 2025 as consumers begin repaying their debts.
A significant factor contributing to the high credit card debt levels is the elevated interest rates, which make borrowing more expensive. Despite these financial burdens, researchers pointed out that rising income levels could help offset some of the strain, signaling a degree of economic stability.
“Higher income levels have been observed alongside the increase in debt, which suggests that many households may still be able to manage their financial obligations,” said a Federal Reserve researcher during a media briefing.
Delinquencies on the rise, especially in auto loans
While credit card debt remains a major concern, delinquencies—or missed payments—are also on the rise. The report indicated an increase in credit card delinquencies during the fourth quarter, reflecting the financial stress some consumers are facing.
Auto loan delinquencies have also become a growing issue. Americans now owe nearly $1.7 trillion in auto loan debt, and many borrowers are falling behind on their payments. According to New York Federal Reserve researchers, one of the key reasons for this trend is the higher cost of new and used vehicles, which surged in the wake of the pandemic.
“While mortgage delinquency rates are similar to pre-pandemic levels, auto loan delinquency transition rates remain elevated,” said Wilbert van der Klaauw, an economic research adviser at the New York Federal Reserve. “High auto loan delinquency rates are broad-based across credit scores and income levels.”
The increase in auto loan delinquencies suggests that more Americans are struggling to keep up with car payments, potentially due to a combination of rising interest rates and inflationary pressures.
As household debt continues to rise, financial experts urge consumers to be mindful of their borrowing habits and focus on managing their debt responsibly. While some may be able to handle the increased financial burden due to higher wages, others may find themselves at risk of falling behind on payments, leading to long-term financial difficulties.
