Amid high inflation and rising interest rates, credit card balances increased to $931 billion in the final quarter of 2022, according to the latest Credit Industry Insights report by TransUnion.
Additionally, credit card originations hit a new record. The number of new credit cards opened spiked by 21.6 million in the third quarter, representing a 7.4% year-over-year increase. Now, more than 202 million consumers have access to credit cards.
"Bankcard balances and originations continue to climb as consumers seek ways to cope with inflation, and this is particularly the case among Gen Z consumers, who have seen growth of 19% in originations YoY and 64% in balances over the same period," Paul Siegfried, the senior vice president and credit card business leader at TransUnion, said in a statement.
If you’re struggling with high-interest credit card debt, you could consider paying it down with a personal loan at a lower interest rate. You can visit Credible to get your personalized rate without affecting your credit score.
Credit card delinquencies may hit record level in 2023
As Americans' credit card balances have continued to grow, so has the number of delinquencies, according to TransUnion’s research.
Serious credit card delinquencies are expected to increase to 2.6% at the end of 2023, according to the 2023 Consumer Credit Forecast by Transunion. That's up from 2.1% at the end of 2022. Delinquency rates could reach levels not seen since 2010.
"Rapidly increasing interest rates and stubbornly high inflation combined with recession fears represent the latest in a series of significant challenges consumers have faced in recent years," Michele Raneri, the vice president of U.S. research and consulting at TransUnion, said in the forecast report. "It’s not surprising then to see pronounced increases in delinquency rates for credit card and personal loans, two of the more popular credit products."
Nonetheless, many Americans are still optimistic.
"Despite a challenging macroeconomic environment, TransUnion’s new Consumer Pulse study found that more than half (52%) of Americans are optimistic about their financial future during the next 12 months," TransUnion said in its forecast report.
If you’re having trouble paying off credit card debt, you could consider getting a personal loan at a lower interest rate. You can visit Credible to compare options from different lenders at once, without affecting your credit score.
HELOCs hit record high amid strong inflation
As Americans dealt with higher prices, many tapped into their home’s equity to meet their financial goals. Home equity lines of credit (HELOCs) allow consumers to borrow a portion of their home’s equity, the difference between their home’s value and the balance on their mortgage, to cover expenses. HELOCs increased 18% year-over-year in the third quarter, according to TransUnion. In fact, HELOC balances reached an all-time high of $20.2 trillion.
"HELOCs and Home Equity Loans continue to grow at unprecedented levels as homeowners increasingly take advantage of the record levels of tappable home equity they have built in their homes," Joe Mellman, senior vice president and mortgage business leader at TransUnion, said in a statement. "The main reasons why homeowners utilize the equity available to them is to consolidate debt, home improvement and big ticket purchases."
If you are struggling to pay off debt, you could consider using a personal loan to consolidate your payments at a lower interest rate, saving you money each month. You can visit Credible to compare multiple lenders at once and choose the one that's the best option for you.
Have a finance-related question, but don't know who to ask? Email The Credible Money Expert at email@example.com and your question might be answered by Credible in our Money Expert column.