With pandemic savings long gone, Americans carrying record debt loads in February
Americans are carrying more debt than ever before, with COVID-19 savings long gone and as rising interest rates and ongoing inflation continue to eat into household budgets.
Consumer debt hit a record high of $4.82 trillion in February, according to a new report from the Federal Reserve.
But while debt continued to rise last month, it grew more slowly than earlier in the recovery. Compared to its levels a year ago, credit-card debt increased 5% in February, much slower than its January jump of 12.7%.
The data indicates that the Fed's efforts to slow consumer spending by hiking interest rates are working, according to Ted Rossman, credit expert at Bankrate.com
"It does seem that the Fed's interest rate hikes are starting to have the desired effect in terms of slowing economic growth and spending," he told CBS MoneyWatch.
Other kinds of debt, including auto loans and loans for mobile homes, education, boats, trailers or vacations, rose even more slowly, at a rate of 3.4% in February — a substantially slower increase than in the first three quarters of last year.
"Not as much to cut"
Some of this burgeoning debt load is driven by interest on existing debt, as credit card interest rates hit record highs, Rossman noted. Additionally, more consumers are shopping with credit cards and with digital payments as opposed to cash.
Lower-income Americans, in particular, are likely putting some essentials on credit. This group already chewed through any savings built up during the pandemic amid high inflation and slowing wage growth.
"They are hit harder by inflation because there is less money to go around and their budgets are already limited to necessities to begin with, so there is not as much to cut," Rossman said.
"Massive buildup" of debt
Americans paid down a large chunk of their credit card debt in 2020, in the depths of the coronavirus pandemic. But since 2021, there's been a "massive buildup" of consumer debt, according to WalletHub analyst Jill Gonzalez.
"We saw a huge paydown of debt during the pandemic when there weren't a lot of thing to buy or people to see," she told CBS MoneyWatch. "But we've seen incredible demand since the peak of the pandemic, coupled with record-high inflation. So the combo there, of people now taking trips they'd put off, plus the cost of goods and services increasing, is driving debt."
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