Credit Card Debt Hits $1.29 Trillion

American households carried $1.29 trillion in credit card debt during the three months ending in September. This figure represents a $22 billion increase from the previous quarter, according to the Federal Reserve Bank of New York.

The total is 67% higher than in the first quarter of 2021. At that time, pandemic restrictions limited spending on travel and dining out. Overall household debt, which includes mortgages, student loans, auto loans, and home equity lines of credit, rose by $334 billion in the third quarter to reach $19.1 trillion.

This total stands $5 billion higher than at the end of 2019, just before the pandemic recession. Ted Rossman, senior consumer finance analyst at Money Management International, noted that voters expressed anger over high living costs in recent elections. He said prices have averaged 30% higher since 2019, causing millions to deplete savings and borrow to cover basic expenses.

Federal data indicates the national savings rate has fallen below 4% of total income. This level is significantly lower than pre-pandemic norms. Rossman described household budgets as reaching a breaking point. He reported that the last two months saw the busiest enrollment for debt management plans in 15 years.

Consumer spending is showing signs of slowing after a year of resilience. A monthly index from the National Retail Federation found retail sales grew at the slowest pace in nearly a year last month. The increase was just 0.2%, a figure that would have been weaker without strong Halloween sales and early holiday promotions, said Matthew Shay, president and CEO of the NRF.

Shay stated that households are carefully managing budgets and timing purchases to align with special offers and sales events. Retailers continue to offer promotions and competitive prices to keep everyday items and holiday gifts affordable. Inflation remains a primary driver of these financial pressures, particularly after the war with Iran reignited price increases.

Since March, consumer price index growth has averaged more than 3%, exceeding the Federal Reserve's 2% comfort zone. The Bureau of Labor Statistics reported that while monthly price growth slowed overall, costs accelerated for a wide range of goods and services. Higher transportation costs and supply chain bottlenecks are filtering through the economy. Oil and gasoline prices have dropped following the Democratic midterm victory, but experts doubt energy costs will return to pre-war levels due to global oil flow disruptions.