Credit cards

Americans are opening record number of credit cards as inflation rises

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Credit card debt is at an all time high.


Key points

  • Total revolving credit debt is at an all-time high, breaking the pre-COVID-19 record set in 2019.
  • Americans opened 11.5 million new bank credit cards in the first two months of the year, nearly a third more than the previous year.
  • Mortgage and auto loans also increased, although the number of new mortgage and auto loans fell.

As Americans grapple with the highest inflation in 40 years, the number of new credit cardstyle=”text-decoration: underline”> have risen as more Americans rely on them to cope with high prices. According to a recent Federal Reserve report, revolving credit (credit cards and lines of credit) grew 19.6% year over year to $1.103 billion. This is an all-time high, breaking the pre-COVID-19 record of $1.092 trillion in 2019. Credit card debt fell to $974.6 billion in 2020 and has been steadily rising. increase since.

New credit cards are on the rise

According to an Equifax survey, Americans received 11.5 million new bank credit cards through February 2022. This is a 31.4% increase from the previous year. The total limits for these credit cards were $55.5 billion, an increase of 59.2% over the previous year. Total credit limits now stand at $4.12 trillion, $224 billion above the pre-pandemic level.

Credit card balances fell by $15 billion according to the Federal Reserve’s quarterly report on household debt and credit. This is common as people pay down their credit cards starting around the holiday season. However, that’s $71 billion more than the first-quarter 2021 sales, which is a big year-over-year increase.

Mortgage and auto loan balances push up total household debt

Household debt at the end of the first quarter of 2022 increased by $266 billion, or 1.7% more than in the previous quarter. Total household debt reached $15.84 trillion, $1.7 trillion more than at the end of 2019, just before the pandemic. Mortgages increased by $250 billion and auto loans by $11 billion.

While mortgage and auto loan balances increased, the number of new loans declined in the first quarter of 2022. New mortgage loans, including refinancing loans, reached $859 billion. That’s still $197 billion more than the quarter just before the pandemic hit. Data shows that Americans are using their credit cards more and taking out fewer mortgages as they need to borrow more due to high inflation and react to rising interest rates.

Mortgages are by far the largest component of household debt at 71%. The second-largest component of household debt is student loans, which stood at $1.59 trillion, up $14 billion from the previous quarter. The Fed report shows consumers are relying more on credit cards as high inflation has dramatically increased the cost of everything from food and gas to housing. Americans are taking on less mortgage and auto loan debt as the Fed raised interest rates to the highest since 2009.

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