Credit card debt tops $1.28 trillion
Americans end 2025 with more debt than ever before.
Credit card balances broke a new record in the fourth quarter, increasing by $44 billion to $1.28 trillion. New report on household debt It was announced Tuesday by the Federal Reserve Bank of New York. This is an increase of 5.5% from a year ago.
The central bank’s monthly Consumer Expectations ResearchThe report, released Monday, also found that fewer consumers expect their household’s financial situation to be better off a year from now, and a larger share expect it to be worse off.
‘Evidence consistent with a K-shaped economy’
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As consumers increase their spending towards the end of the year, during the peak holiday shopping period, credit card debt often increases. “Given what we’re seeing in the labor market, spending is holding up pretty well,” New York Fed researchers said at a press conference on Tuesday.
Even as the job market shows Despite signs of strain, consumer spending remained broadly strong. But other research shows this is attributed to strong purchasing by high-end consumers.
“You see evidence consistent with a ‘K-shaped’ economy,” New York Fed researchers said. “Some groups are really struggling.”
This isn’t just evident in the number of auto loan, credit card and home equity loan delinquencies, New York Fed researchers said. “You also see this in rising mortgage default rates,” the researchers said, referring to the increasing number of homeowners who are behind on their mortgage payments.
Fed researchers also found that overall, “higher default rates are more pronounced in the lowest-income areas.”
Affordability puts pressure on credit card debt
Meanwhile, credit cards are one of the most expensive ways to borrow money, with the average credit card interest rate around 20%. About 175 million people in the U.S. currently have credit cards, and while some pay their bills in full each month, about 60% of credit card users carry a balance from one month to the next, according to the New York Fed.
More than half of consumers, 55 percent, carry a credit card balance to cover essential expenses, according to a separate report by the debt management company To succeed It was published on Monday.
The survey of 2,000 consumers found that many of those left behind had to choose between keeping up with their debt payments and meeting their daily needs.
“This is what the K-shaped economy looks like in the real world. For an affluent half of the population, their financial lives are not disrupted by momentary disruptions. But for everyone else, financial prioritization and trade-offs are a way of life,” Achieve co-founder and CEO Andrew Housser said in a statement. he said.
“The longer this goes on, the wider the gap gets,” he added.
