Americans Struggle to Get Credit Increases as Debt Surges

Americans are getting pessimistic about the future of their financial lives.

This comes at a time when credit card debt pierced through the one trillion dollar level for the first time since the Federal Bank of New York began tracking the data.

Meanwhile, the latest Survey of Consumer Expectation from the aforementioned institution released on Monday found that “perceptions about current credit conditions and expectations about future conditions both deteriorated.”

“This is the first time credit card debt has topped $1 trillion in this country,” wrote Matt Schulz, chief credit analyst at online lending platform LendingTree.

With the economy fragile, these numbers may jump even higher, he suggested.

The U.S. Federal Reserve aggressively began hiking interest rates last year in an attempt to blunt soaring inflation that wreaked havoc on the finances of Americans. The move helped bring down prices from their historic highs while at the same time evade hurting the labor market, with some economists and policy-makers now optimistic that the world’s largest economy may avoid a recession.

But with the Fed aiming to bring down inflation to its target band of 2 percent, it may continue to hike rates to meet that goal. That could come at a price.

“Thanks to still-rising interest rates, stubborn inflation and myriad other economic factors, credit card balances are likely only going to climb, at least in the near future,” Schulz said.

Meanwhile, households are noticing that access to credit has been a struggle compared to a year ago, a trend they will likely see continue going forward.

“Expectations for future credit availability also deteriorated in August, with the share of respondents expecting it will be harder to obtain credit in the year ahead increasing,” the New York Fed said on Monday.

Overall, “households’ perceptions about their current financial situations and expectations for the future also deteriorated.”

Working people’s—those with a high school education and earn below $50,000 a year— fears over losing their jobs were at its highest level since April of 2021, the New York Fed saw in its survey. That feeling was also accompanied by declining optimism about finding a new job, the analysis showed.

At the same time, the expectation that the unemployment rate—currently at 3.8 percent—will be higher a year from now also saw a jump.

Overall, a dimming view of the economy of the American household emerged from the survey.

“Perceptions about households’ current financial situations compared to a year ago deteriorated slightly in August, with the share of households reporting a worse situation compared to a year ago rising,” the New York Fed said. “Similarly, year-ahead expectations about households’ financial situations deteriorated in August with the share of households expecting a worse financial situation in one year from now rising.”