Credit card debt hits all-time high and has households near 'breaking point'

By Jessica Dikler -

More consumers are leaning on credit cards to pay for increasingly expensive necessities like food and rent.

That trend helped push total credit card debt to a record $930 billion by the end of 2022, an 18.5% increase from a year earlier, according to the latest quarterly report from TransUnion, a credit analytics firm. .

The average person's balance increased to $5,805 during that same period.

[Federal Regulators Shut Down Silicon Valley Bank: Biggest Bank Fall Since 2008 Raises Fears of Financial Crisis]

At this rate, households are approaching a "breaking point," according to another study by WalletHub.

Using the Great Recession as a guide, the projected tipping point is the level of household credit card debt that will become unsustainable for most people, according to Jill Gonzalez, an analyst at WalletHub.

Total credit card debt in the United States surpassed $930 billion at the end of last year.

A record number, according to experts. John Raoux / AP

“That's when people won't be able to keep up with their bills,” he said.

“We are getting closer and closer to that breaking point.”

"The increase in delinquency is something to take into account"

Delinquencies are already on the rise, TransUnion determined.

A delinquent balance is one that is 60 days or more past due.

“The rise in delinquencies is something to watch out for,” said Michele Raneri, vice president of US research and consulting at TransUnion.

As long as unemployment remains low, households will be better able to pay their bills, she noted.

"If unemployment rises and we see a rise in delinquencies, that indicates a longer-term problem."

For now, job openings still outnumber available workers, according to the Labor Department's recent survey of job openings and job turnover.

Demand for loans to buy houses is at its lowest point in 30 years

March 2, 202300:29

Credit cards are one of the most expensive ways to borrow money.

Annual percentage rates (APRs) are currently hovering around 20%, an all-time high.

If the Federal Reserve announces a half-point hike in its benchmark interest rate at the March meeting, those APRs will go even higher.

That will cost credit card borrowers an additional $3.4 billion in interest charges over the next 12 months, WalletHub calculated.

How to deal with credit card debt

“Something has to give,” González said.

It's time to rein in spending, pay down debt and avoid any new debt, he added.

“However, cardholders do have options,” said Matt Schulz, chief credit analyst at LendingTree.

Zero percent balance transfer credit card offers are more plentiful than they were a year ago and remain one of the best weapons Americans have in the battle against debt, he explained.

Tax season causes concern after the impact of inflation on refunds

March 1, 202300:26

Those who can should also refinance with a lower interest personal loan.

Those rates have also gone up recently, but at 10%, on average, they're still well below credit card interest rates, according to Schulz.

[The economy remains strong and adds 311,000 jobs in February, although it slows down slightly and unemployment rises to 3.6%]

Otherwise, go back to basics, advised Ted Rossman, a senior industry analyst at Bankrate.

“Take a second job, sell things you don't need, cut your expenses,” he said.

“A dollar saved is a dollar earned, and every dollar of credit card debt paid down guarantees an average tax-free return of about 20%,” Rossman said.