US Household Debt Inches Closer to Record $18 Trillion in 3rd Quarter: New York Fed

This illustration picture shows debit and credit cards arranged on a desk in Arlington, Va. on April 6, 2020. Olivier Douliery/AFP via Getty Images

New Federal Reserve Bank of New York data show that total U.S. household debt inched closer to $18 trillion in the third quarter, with delinquency rates remaining elevated.

According to the New York Fed’s Household Debt and Credit Report for the July to September period, household debt increased by $147 billion to $17.94 trillion.

Credit card balances rose by $24 billion to $1.17 trillion. Auto loan debt climbed by $18 billion to $1.64 trillion.

Home equity line of credit (HELOC) balances jumped by $7 billion to $387 billion, “representing the 10th consecutive quarterly increase” since the first quarter of 2022.

While income growth has outpaced household borrowing, New York Fed economists say “elevated balance levels continue to reveal stress for many households, even amid some moderation in delinquency trends this quarter.”

Aggregate delinquency rates inched higher to 3.5 percent from the second quarter, though the numbers offered a mixed assessment of households’ debt situation.

Credit card delinquency rates eased to 8.8 percent from 9.1 percent.

However, the flow into serious delinquency (90 days or more delinquent) surged above 7 percent in the third quarter, up from 5.78 percent for the same three-month span a year ago.

Early delinquency transitions for auto loans and mortgages edged up by 0.2 and 0.3 percentage points, respectively. The flow into serious delinquency also rose to 2.9 percent and 1.08 percent, respectively.

“About 126,000 consumers had a bankruptcy notation added to their credit reports this quarter, a small decline from the previous quarter,” the report stated.

Regional central bank economists concluded that the aggregate debt-to-income ratio is below pre-pandemic levels despite record nominal (non-inflation-adjusted) consumer debt.

“More recently, income growth has averaged a robust 6.2 percent annually, while aggregate debt balances have expanded at just over 4 percent per year,” they wrote in a paper attached to the quarterly study.

“This difference has induced some downward movement in the debt-to-income ratio over the last two years.”

Households’ projections for financial situations in the coming year have also been mixed.

According to the New York Fed’s October Survey of Consumer Expectations (SCE), median one-year-ahead household income growth forecasts have hovered around 3 percent for nearly two consecutive years.

Household spending growth expectations over the next 12 months stood at 4.9 percent.

Additionally, nearly a quarter (23 percent) say they will be financially worse off a year from now. Thirty percent think they will be better off next year, while 48 percent say it will be about the same.

As for debt delinquencies, 14 percent are concerned they will be unable to make a minimum debt payment over the next three months, little changed from September.

This is also the highest reading since the onset of the pandemic.

‘Difficulty Making Ends Meet’

Achieve’s think tank, the Achieve Center for Consumer Insights, recently published the results of a new report aimed at complementing the New York Fed’s quarterly study on household debt and credit.

The fourth-quarter survey found that more than one-quarter (28 percent) of respondents have witnessed their debt rise over the past three months.

The research identified various reasons why consumer debt continues to grow. Thirty percent noted the “difficulty making ends meet without additional debt,” and 20 percent referenced “general overspending or living beyond your means.”

Others cited job loss or reduced income (19 percent), child-related expenses (16 percent), and major home repairs (12 percent).

People walk at a shopping mall in Santa Anita, Calif., on Dec. 20, 2021. Frederic J. Brown/AFP via Getty Images

“Across the board, unemployment is low and wages have risen, but those macroeconomic conditions aren’t felt equally across the population, especially for consumers who live in areas where the impact of inflation is the greatest,” Bradford Stroh, the co-CEO and co-founder of Achieve, said.

“More than a quarter of Americans are seeing their amount of debt increase and a majority don’t have enough money to cover their spending month to month.

“The slippery slope of debt will increase for many households if they don’t take steps to realign their finances.”

While close to half (47 percent) of respondents reported an improved financial situation, optimism for the future diminished.

When respondents were asked how their situation will compare in the second quarter of 2025, 40 percent said it will improve. This is down from 57 percent in the April through June period this year.

With the holidays around the corner, a growing number of consumers are feeling the financial stress that could impact their Christmas shopping plans.

According to Experian’s annual holiday shopping survey, 68 percent of consumers say inflation will impact their Christmas shopping endeavors.

Moreover, 33 percent of consumers say they are stressed when thinking about Christmas, which could be related to the 63 percent who reported they spend too much during the holidays.

Still, consumers are anticipated to feel the holiday spirit at the shopping mall or on Amazon.

Last month, the National Retail Federation projected that this year’s U.S. holiday sales will increase between 2.5 percent and 3.5 percent from 2023.

Consumer spending is expected to hit a record $902 per person, up about $25 per month from last year.