Credit card debt hit a record $1.21 trillion — here's why 'no one should be surprised,' expert says

Collectively, Americans now owe a record $1.21 trillion on their credit cards, according to a new quarterly report on household debt from the Federal Reserve Bank of New York.

Credit card balances jumped by $45 billion in the fourth quarter of 2024, driven in part by holiday spending, and are now 7.3% higher than a year ago.

At the same time, credit card delinquency rates “remained elevated,” the New York Fed researchers found — with 7.18% of balances transitioning to delinquency over the last year. That uptick could indicate “borrowers are having some difficulty repaying,” the researchers said on a press call Wednesday.

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“No one should be surprised that credit card debt hit another record high,” said Matt Schulz, chief credit analyst at LendingTree and the author of “Ask Questions, Save Money, Make More.”

“Stubborn inflation has shrunk a lot of Americans’ financial margin for error from slim to about none, forcing people to lean more heavily on credit card debt,” Schulz said.

Credit card debt has remained stable over the last two decades. However, in the years since the pandemic, households largely spent down their excess savings, which sparked a rebound in credit card balances. Consumer spending continues to remain strong, despite high borrowing costs.

“There’s very little reason to believe that we won’t continue to see new credit card debt records being set going forward,” Schulz said.

Credit card rates top 20%

Meanwhile, credit cards have become one of the most expensive ways to borrow money.

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Lower-income households that had to stretch to cover price increases, have been hit especially hard after the Federal Reserve’s string of interest rate hikes lifted the average credit card rate to more than 20% — near an all-time high.

Even as the Fed lowered its benchmark at the end of last year, the average credit card rate barely budged.

“For people who are carrying a balance … a higher interest rate is going to make those balances rise more quickly, it’s also going to make the payments higher on a monthly basis,” the New York Fed researchers said.