For the first time in history, total household credit card debt in the United States topped the $1 trillion level. As of the second quarter of 2023, total consumer credit card debt stood at $1.03 trillion. This represents seven consecutive quarters of year-over-year growth in this statistic, including a jump of 16.2% in the second quarter of this year. Despite the double-digit year-over-year jump, a look at the quarterly numbers seems to indicate stabilizing debt levels broadly. Total household debt stood at $17.06 trillion in the second quarter versus $17.05 trillion in the first quarter.
Credit cards are the most prevalent form of household debt in the United States, with 69% of Americans having a credit card account as of the second quarter. This number continues to rise as time goes on, up from 65% in December 2019 and 59% in December 2013. Despite the rapid expansion in the adoption of credit cards, the relative size of the debt load carried by this class of credit has remained consistently below 10% of all debt held by households, with mortgages making up the largest chunk at around 70% in terms of dollar amount.
The sheer size of outstanding credit card debt as a standalone statistic sounds scary, but with context, it paints a picture of the relative stability of the strength of the American consumer over time. From 2000 through the second quarter of 2023, total credit card debt has increased 106%, greater than the total rate of inflation from January 2000 through June 2023, but not nearly as much as household net worth, which has increased 246%. As far as consumer balance sheets go, this means that credit cards are making up less of the liability side, and more generally, given the constant share of credit card debt relative to all forms of consumer debt, households are less indebted. Further, credit card utilization, which is how much of your credit limit you use, remains below its pre-pandemic level of 24%, currently sitting at 22%.
Another important thing to look at when assessing debt is the ability of the borrower to service the debt. As of its most recent reading in June, credit card debt as a percentage of household disposable income is 21%, which is still below its pre-pandemic average of 26%. Further, credit card debt as a percentage of total bank deposits remains historically low at 5.8%, lower than any point pre-pandemic dating back to at least 2003. So, even though the nominal level of credit card debt hit an all-time high, the reality is that households are less indebted and better positioned to handle larger dollar amounts of debt thanks to lower overall household leverage, making the $1 trillion number less scary than it sounds.
Written by: Brian Sawyer