U.S. consumers added a total of $67.1 billion in credit card debt in the second quarter of a fiscal year in 2022 amid runaway inflation, according to new research from WalletHub.
The Quarterly Credit Card Debt Study is based on an analysis of the latest consumer finance data from TransUnion as well as the Federal Reserve and Bureau of Labor Statistics.
The study found that the increase in credit card debt during the second quarter was three and a half times higher than the post-Great Recession average for the second quarter of the year. Meanwhile, outstanding credit card debt rose about 6% in the same quarter from the prior quarter.
According to the personal finance website’s study, the average credit card debt per household in the second quarter of this year was $8,942, up from $8,558 in the second quarter of 2021, marking a 4.5% increase.
Debt increases were more drastic in some states than others, according to the study, which found that California saw the largest total increase in credit card debt ($7,610,582,696 ), followed by Texas ($5,872,759,512), Florida ($4,609,647,346), New York ($4,160,718,866). ) and Illinois ($2,626,375,641).
States that did “better” were Alaska ($196,520,703), South Dakota ($169,917,629), North Dakota ($155,140,457), Wyoming ($127,027,394 $) and Vermont ($131,966,799).
The drastic rise in credit card debt follows a record reduction in 2020 during the COVID-19 pandemic, when consumers cut spending amid tight lockdowns and increased government stimulus checks .
“The fastest economic recovery”
Earlier this week, US Treasury Secretary Janet Yellen touted President Joe Biden’s economic policies for enabling the US economy to recover quickly from the pandemic, calling it “one of the most fastest in modern history”.
The US economy contracted for the second straight quarter in August, meaning it still remains in a technical recession.
A separate study by WalletHub found that a growing number of Americans, 85%, are concerned about inflation, while 62% said their monthly grocery spending has been most affected by the surge in inflation.
The survey was conducted online, September 5-9, with 350 respondents, and comes as new data on August inflation figures are due to be released on September 13.
WalletHub said it now expects consumers to add a total of $110 billion in debt by the end of this year, and warned that another 75 basis point hike by the Federal Reserve could cost consumers credit card users “an additional $5.3 billion this year, on peak hikes so far this year.”
“When you take into account the March, May, June, July and September rate hikes, credit card users will end up paying about $20.9 billion more in 2022 than they otherwise would have” , wrote WalletHub.
The central bank is widely expected to hike another 75 basis points in interest rates next week, according to a Reuters poll economists published on September 13.