Credit card use coming back; Q2 total household debt increases to $12.3 trillion
The credit card is coming back, even among people with the lowest credit scores.
In the second quarter, total household debt increased by $35 billion to $12.3 trillion, according to the New York Fed’s latest quarterly report on household debt. That increase was driven by two categories: auto loans and credit cards.
While auto loans have been rising at a steady clip for the past six years, rising credit-card balances are a new development. After the recession, households cut back on credit-card use until 2014. Since then, card balances have risen by about $70 billion.
The report underscores how the nation’s credit cycle has evolved, from broadly deleveraging in the aftermath of the financial crisis to a renewed—but still tentative—embrace of credit.
From 2008 to 2013, total household debts dropped by more than $1.5 trillion. But first student-loan and auto-loan balances began to rise, and then mortgages and finally credit cards. Total household debt balances are now $400 billion below their 2008 peak.
Credit-card debt had declined as households cut back on their use and as financial institutions cut off credit. These effects were particularly pronounced among people with low credit scores, where the number with a credit card declined by more than 10%, according to a special New York Fed supplemental report on credit cards.
