Credit Card Balances Hit Record Above $1 Trillion, Suffer “Pronounced Worsening” Amid Surge In New Delinquencies

Once a quarter, the Fed publishes its Household Debt and Credit report which provides a (lagging) snapshot of household finances in the previous quarter. And while the report gives little incremental data to those who follow the Fed’s monthly Consumer Credit (G.19) statement, which just yesterday revealed the first decline in credit card debt since April 2021…

… it does provide a convenient snapshot of recent trends in Household balance sheets.

With that in mind, here is the punchline of the latest report: as of June 30, the Fed found aggregate household debt balances increased by $16 billion in the second quarter of 2023, a modest 0.1% rise from 2023Q1. Balances now stand at $17.06 trillion and have increased by $2.9 trillion since the end of 2019, just before the pandemic recession.

Taking a closer look at the types of consumer credit balances:

• Mortgage balances were largely unchanged from the previous quarter, during the second quarter of 2023 and stood at $12.01 trillion at the end of June, in large part due to declining mortgage originations and slowing home prices.
  • Mortgage originations, which include refinances, stood at $393 billion in the second quarter, representing a $70 billion increase from the first quarter. Other balances, which include retail cards and other consumer loans, increased by $15 billion.
• Balances on home equity lines of credit (HELOC) were essentially flat as well; the outstanding HELOC balance stands at $340 billion.
• Credit card balances increased by $45 billion, a 4.6% quarterly increase, and stood at $1.03 trillion, a record high.
  • Credit card accounts expanded by 5.48 million to 578.35 million; that’s roughly 2 credit cards for every adult.
  • Aggregate limits on credit card accounts increased by $9 billion and now stand at $4.6 trillion.
• Auto loan balances increased by $20 billion, continuing the upward trajectory that has been in place since 2011.
• Student loans balances declined by $35 billion. Student loan balances now stand at $1.57 trillion.
• Other balances, which include retail cards and other consumer loans, increased by $15 billion.
• In total, non-housing balances grew by $45 billion.

And in table format:

As noted above, mortgage originations, measured as appearances of new mortgages on consumer credit reports and including both refinance and purchase originations, remained a very subdued $393 billion in 2023 Q2 (reflecting a modest increase in purchase originations as refinance originations have collapsed) which however was the first uptick after two years and a rebound from the 9-year low observed in the previous quarter.

The chart above also shows that the median credit score for newly originated mortgages increased by 4 points, to 769. The median credit score on newly originated auto loans declined by 5 points, after a transitory uptick in the first quarter.

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