Americans are opening record number of credit cards as inflation rises
As Americans grapple with the highest inflation in 40 years, the number of new credit card surged as more Americans rely on them to meet high prices. According to a recent Federal Reserve report, revolving credit (credit cards and lines of credit) grew 19.6% year over year to $1.103 billion. This is an all-time high, breaking the pre-COVID-19 record of $1.092 trillion in 2019. Credit card debt fell to $974.6 billion in 2020 and has been steadily rising. increase since.
New credit cards are on the rise
According to an Equifax survey, Americans received 11.5 million new bank credit cards through February 2022. This is a 31.4% increase from the previous year. Total limits for these credit cards were $55.5 billion, a 59.2% increase over the previous year. Total credit limits now stand at $4.12 trillion, $224 billion above the pre-pandemic level.
Credit card balances fell by $15 billion according to the Federal Reserve’s quarterly report on household debt and credit. This is common as people pay off their credit cards starting around the holiday season. However, that’s $71 billion more than the first-quarter 2021 sales, which is a big year-over-year increase.
Mortgage and auto loan balances push up total household debt
Household debt at the end of the first quarter of 2022 increased by $266 billion, or 1.7% more than in the previous quarter. Total household debt reached $15.84 trillion, $1.7 trillion more than at the end of 2019, just before the pandemic. Mortgages increased by $250 billion and auto loans by $11 billion.
While mortgage and auto loan balances increased, the number of new loans declined in the first quarter of 2022. New mortgage loans, including refinancing loans, reached $859 billion. That’s still $197 billion more than the quarter just before the pandemic hit. Data shows that Americans are using their credit cards more and taking out fewer mortgages as they need to borrow more due to high inflation and react to rising interest rates.
Mortgages are by far the largest component of household debt at 71%. The second-largest component of household debt is student loans, which stood at $1.59 trillion, up $14 billion from the previous quarter. The Fed report shows consumers are relying more on credit cards as high inflation has dramatically increased the cost of everything from food and gas to housing. Americans are taking on less mortgage and auto loan debt as the Fed raised interest rates to the highest since 2009.
Check out The Ascent’s best credit cards for 2022
We are firm believers in the Golden Rule, which is why editorial opinions are our own and have not been previously reviewed, approved or endorsed by the advertisers included. The Ascent does not cover all offers on the market. The editorial content of The Ascent is separate from the editorial content of The Motley Fool and is created by a different team of analysts. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.