Understanding the Surge in Credit Card Debt in 2023

Credit cards have become an essential part of the modern economy, with over half a billion accounts in the United States alone. According to Experian data, U.S. consumers drive more than $4.5 trillion in purchases annually through these accounts. While this spending is beneficial for economic growth, it also leads to increasing credit card balances. As of the third quarter (Q3) of 2023, consumers collectively owed more than $1 trillion on their credit cards. This article delves into the factors driving the rise in credit card debt and its implications.

Overall Credit Card Debt Increases to Nearly $1.07 Trillion in 2023

Total credit card balances grew by $157 billion, reaching nearly $1.07 trillion by the end of Q3 2023. This 17% increase from Q3 2022 was spread over a larger credit card account base, which grew by more than 8% over the same period. The number of credit card accounts rose to approximately 569 million, an increase of 62 million from the previous year.

Average Credit Card Balance up 10%

The average credit card balance among consumers was $6,501 as of Q3 2023, a 10% increase from Q3 2022. This rise reflects changing consumer habits, elevated interest rates, and ongoing inflation. The increase in average balances was more pronounced in certain states, particularly in the Western U.S., where average balances grew by at least 11% in 2023.

Average Credit Card Balances by State

States with faster-growing debt saw double-digit percentage growth rates in average balances, while those with more measured credit usage experienced increases of 7% to 9%. For instance, Arizona’s average balance increased by 12.9%, while California’s rose by 11.7%. Other states like Florida, Georgia, Tennessee, and Texas also saw significant increases in average balances, exceeding 10% in 2023.

Average Credit Utilization Inches Up

The average credit utilization ratio among consumers climbed to 29% in 2023, up from 28% in 2022. This increase is a result of average balances growing faster than average credit limits. Credit utilization is a crucial factor in credit score calculations, with lower utilization generally being better for maintaining a good credit score.

Millennials Have Fastest-Growing Average Credit Card Balances; Gen X the Highest Average Balances

In 2023, millennials saw the fastest growth in average credit card balances, increasing by 15.4% to $6,521. However, Generation X holds the highest average balances, with an average of $9,123, exceeding the nationwide average by more than 40%. This trend indicates that while millennials are rapidly accumulating debt, Gen X continues to carry the most significant credit card debt burden.

Higher Monthly Bills May Be Impacting Credit Card Balances

Experian’s survey of 1,237 credit card users in early March revealed that 58% of respondents experienced significant increases in their monthly bills. Among them, 75% said these new or increased bills impacted their ability to pay down their credit card balances. The most common culprits were insurance premiums and utilities, which have seen substantial increases in recent months.

Credit Card Trends to Look Out For in 2024

Several trends are expected to shape credit card usage in 2024:

• Increased reliance on credit cards for monthly bills: With higher home and auto insurance premiums, new student loan repayments, and higher interest rates on auto loans and credit cards, more consumers may use credit cards to bridge the gap between income and expenses.
• Stricter lending criteria: Banks are becoming more selective, offering lower credit limits, requiring higher minimum credit scores, and demanding higher annual percentage rates (APRs) for unsecured credit.
• Rising APRs and balances: With average credit card APRs already exceeding 20%, refinancing existing revolving debt may become more compelling. Balance transfer cards and debt consolidation loans offer potential solutions for managing high-interest debt.

At O1ne Mortgage, we understand the challenges that come with managing credit card debt. If you’re looking for ways to refinance or consolidate your debt, our team of experts is here to help. Call us at 213-732-3074 for personalized mortgage services and solutions tailored to your needs.

By staying informed about credit card trends and taking proactive steps to manage your debt, you can maintain a healthy financial future. Remember, O1ne Mortgage is here to support you every step of the way. Contact us today to learn more about how we can assist you with your mortgage and financial needs.