Americans are carrying more debt than ever before and paying some of the highest credit card rates every recorded, according to new data.
The national average annual percentage rate (APR) for credit card debt is 15.22 percent, according to CreditCards.com’s weekly Credit Card Rate Report.
That 15.22 percent rate has held steady for the past three weeks, while the average APR for a new credit card has reached its highest peak in five years, according to CreditCards.com’s data.
The last time the national average for credit card APRs hit 15.22 percent was in Dec. 2011 during the peak of the holiday shopping season. But that became the peak high, and APR rates fell to 14.95 percent by four weeks later in January.
This year, however, tells a far different story.
Credit card APRs have remained solidly above 15.10 percent all year, and the current yearly APR of 15.17 percent is the highest yearly average ever since CreditCards.com began tracking interest rates in 2007.
Despite these higher rates, U.S. consumers are showing no reluctance to continue piling on their debt, as aggregate U.S. credit card balances are approaching the $1 trillion figure, according to the Federal Reserve.
And credit card balances are on the rise as well. Credit card balances rose 3.4 percent in July to $969 billion, after rising at a rate of 11.5 percent in June.
“The last time Americans carried this much debt was in 2008, just before the financial crisis caused many consumers to temporarily retreat from credit cards and other forms of high-interest debt and aggressively shave down balances,” according to CreditCards.com’s report.
An August report by TransUnion, the credit card reporting agency, found that most of the growth in credit card balances is being fueled by new card users, not existing users running up their balances.
About 10 million U.S. consumers who never previously owned a credit card have opened a new account in the past year, causing the number of American consumers carrying a credit card balance to hit 133 million by the second quarter of 2016. Younger millennials ages 20–29 accounted for 52 percent of all those who opened credit cards for the first time in the second quarter of 2016.
“We have seen clear signs of deleveraging in this segment,” Paul Siegfreid, a TransUnion EVP, said in a statement. “At the same time, increasingly more nonprime consumers are getting access to card credit, usually at lower credit limits. Together, these trends are causing slower growth of balances relative to accounts.”
TransUnion also found that total balances rose to $662 billion in the second quarter of this year, a 6 percent increase from the second quarter of 2015.
Consumers with lower credit scores were more likely to carry a balance than those with a higher credit score, who seem to be more actively paying off their debts than increasing them (probably a reason their credit scores are so high), according to TransUnion.
The serious delinquency rate for credit card users — defined as 90-plus days past due — rose slightly in the second quarter of 2016 to 1.29 percent, up from 1.20 percent in the second quarter of 2015, but is still relatively low, according to Nidhi Verma, a senior director of research and consulting at TransUnion.
“Our latest Industry Insights Report still points to a healthy consumer credit market,” Verma said in a statement. “While more subprime consumers are receiving loans and their balances are rising, we do not see alarming delinquency levels. Some lenders may be taking on more risk, but it’s important to highlight that they are doing so with their risk thresholds in mind. This is clearly seen in the credit card space, where balances in the subprime risk tier have risen nearly 14 percent in the last year, yet credit lines for these consumers have not changed.”