With inflation putting pressure on people’s budgets and raising concerns about a prolonged recession, U.S. consumers are once again adding new credit card debt by the billion, racking up $67.1 billion during Quarter 2 2022, according to WalletHub’s latest Credit Card Debt Study, released this week. That is an all-time record for credit card debt added during the second quarter of a year, and WalletHub now projects that consumers will add a total of $110 billion in debt during 2022.
This new debt is also likely to become even more expensive soon, with the Federal Reserve expected to raise its target rate by 75 basis points on Sept. 21. WalletHub anticipates this will cost people with credit card debt an extra $5.3 billion over the next 12 months.
In addition, the rise in debt is not uniform across the country, as some areas have bigger payment problems than others. With that in mind, WalletHub compared all the states based on how much residents owe to credit card companies – specifically, how those balances changed in Q2.
States with the biggest debt increase were California, Texas, Florida, New York and Illinois. States with the smallest debt increase were Vermont, Wyoming, North Dakota, South Dakota and Alaska.
For the full rankings, visit: https://wallethub.com/edu/cc/credit-card-debt-study/24400/#debt-by-state
Key Stats
• California Debt: The average household in California owes $8,505 in credit card debt, following a $581 Q2 increase.
• Record Q2 Increase. Credit card debt increased by almost $67.1 billion during Q2 2022, an all-time record for the second quarter of the year.
• Bigger-Than-Normal Buildup. Consumers’ Q2 2022 credit card debt increase was 3.5X bigger than the post-Great Recession average for a second quarter.
• Record Annual Projection. WalletHub projects that consumers will end the year with roughly $110 billion more in credit card debt than they started with, which would be close to an annual record.
Fed Rate Hike Survey
• More Costly Debt. A Federal Reserve interest rate increase on Sept. 21 would cost people with credit card debt an extra $5.3 billion in the next year alone. That’s on top of the $15.3 billion increase already caused by the Fed’s previous rate hikes this year.
• Inflation Concerns. 85% of Americans are concerned about inflation right now.
• Fed Increases Affecting Wallets. 63% of people say their wallets have been affected by the Fed’s rate hikes this year.
• Monthly Expenses Affected. 62% of people say inflation has affected their monthly grocery expenses the most, followed by gas (32%) and housing (6%).
• Government Intervention at the Pump. 71% of people think the government should put a cap on gas prices.
• Not Recession-Ready. 44% of people do not think they are financially prepared for a recession.
• High Inflation Preferable to High Unemployment. 56% of Americans say they would prefer high inflation over high unemployment.
Q&A With WalletHub
Analyst Delaney Simchuck
Why are credit card debt levels rising so much?
Credit card debt levels are rising at a record pace in large part due to the combination of high inflation, pent up demand, and consumers settling back into bad habits from before the pandemic. Many people have let their guard down after pinching pennies at the height of the pandemic, especially given the record employment levels we’re currently enjoying.
What do the latest credit card debt statistics tell us about the health of U.S. consumers?
The latest credit card debt statistics indicate that the average U.S. consumer’s financial situation has the potential to get much worse before getting better. As unemployment rates start to rise, people will find themselves with more and more debt, and if prices remain high, a lot of us will have trouble making ends meet.
What is the average household’s credit card balance?
The average household credit card balance was $8,942 in the second quarter of 2022, according to a new WalletHub study, or about 4% higher than it was in the second quarter of 2021. Credit card debt is still well below the average household’s breaking point, but we can expect to be a lot closer by the end of the year.
What advice do you have for people trying to get rid of credit card debt?
If your goal is to get out of credit card debt, try to limit your new purchases to only absolute necessities, put any money you have left over toward paying off your most expensive debt, and transfer at least some of what you owe to a 0% balance transfer credit card. A good balance transfer card will stop new interest from accruing for months, making it easier to pay down what you already owe. WalletHub’s balance transfer calculator makes it easy to pick the right card, plan out your payments, and maximize how much you save.
