Credit card debt is soaring as Americans try to spend their way through economic tumult and grapple with rampant inflation.
Debt from the plastic cards now accounts for about $890 billion of Americans’ $16 trillion of household debt.
Household debt increased by 2% in the second quarter of this year and, while most of the increase was driven by mortgages, consumers racked up a record $100 billion in credit card debt over the last year, according to Bloomberg News.
The 13% jump in credit card debt from the prior year was the highest in more than 20 years, the Federal Reserve Bank of New York said, raising concerns about delinquency.
About 42 million new credit card accounts have been opened since the pandemic began.
“If your costs begin to exceed your income. What do you do? You look for a relief valve through borrowed money,” investor Peter Tarr tweeted.
Americans are relying on credit cards to resist getting dragged down by soaring costs for everything from food to gas.
In some cases, people are supplanting purchases of goods with splurges on travel and experiences.
Credit cards defray costs through debt, but they also offer rewards that can provide a cushion against soaring costs for summer trips and other expenses.
A Wells Fargo survey from late June found nearly three-quarters of Americans (71%) have a credit card that offers rewards and 45% of these cardholders say their credit card usage increased during the pandemic.
Two-thirds of rewards cardholders (65%) say they care about credit card rewards now more than ever.