U.S. Households charge into 2013: Credit card debt rises $2 billion

U.S. Households were able to reduce $74 billion in overall debt in the third quarter, despite racking up $2 billion of new credit card borrowing in an economy that’s showing signs of stress.

The Federal Reserve Bank of New York published its quarterly report on U.S. Household Debt late Tuesday. The NYFED said the overall trend of reducing debt held, but was largely due to reductions in mortgage and home equity lines of credit. The total debt load of U.S. Households as of the end of September was $11.3 trillion, a reduction of $1.37 trillion from the peak level of indebtedness in 2008.

Prior to this quarter, student and auto loans had been the only areas where Americans were borrowing more. And there continues to be trouble with student loans, where the delinquency rate has risen to more than 11 percent.

Credit card usage increases in U.S. Illustration by RD Varnon

The jump in credit card use could be seen as cutting both ways. Some economist see it as proof Americans are more confident in the economy and are willing to borrow more, while others see it as a sign of trouble that stagnate wages have left many families no choice but to use plastic for bills.

It’s perfectly reasonable to expect that there is a little bit of truth in both assessments as the rest of the report provides mixed indicators from an economy still very much in flux, with some doing well and others struggling. But the major concern is whether Americans will start creating a new credit bubble so soon after the last one popped in 2008.



New Mortgage debt rose to $521 billion during the quarter, a sign new homebuyers are active.

The transition from early (30-60 days) into serious (90 days or more) delinquency increased to 26.3 percent,  up by 2.8 percentage points from 2012Q2.

Furthermore, the cure rate – the share of balances that transitioned from 30-60 days delinquent to current – saw a second consecutive decline to 26.4 percent.

Even with the increase in seriously delinquent mortgages, only 5.9 percent of all loans were seriously late.


Outstanding student loan balances rose to $956 billion as of September 30, 2012, an increase of $42 billion from
the previous quarter. But only $23 billion was new debt, while $19 billion was for defaulted loans.

The percent of student loan balances 90 or more days delinquent stands at 11.0 percent.


Auto loan originations rose for the third consecutive quarter, to $85.8 billion, an increase of 4.4 percent.

The delinquency rate for auto loans remained steady at 4.2 percent.

Rob Varnon