Household Debt On The Rise

As the economy has grown, so has household debt. Data tracked by the Federal Reserve shows that debt held by U.S. households rose to over $12.9 trillion in the third quarter, the highest level ever. A favorite form of consumer debt, credit cards, rose by 3.1% for the quarter. The Fed report did note that delinquencies among credit cards and auto loans were rising, an indication that some households might be overstretched.

According to data from the Federal Reserve Bank of New York, total household debt climbed to $12.96 trillion at the end of the third quarter. The current amounts now surpass the debt levels Americans had in 2008, when total consumer debt reached a record high of $12.68 trillion.

The Fed tracks household debt by categories, such as mortgage, student, credit cards, home equity loans, and auto loans. Over the decades, the most consistent and significant amount of household debt has been mortgages.

The recent increase in total overall debt is primarily attributable to a steady rise in both student and auto loans. Recent Federal Reserve data shows that these two loan types are primarily held by younger consumers. The concern is that the difficulty of obtaining mortgage loans has led younger consumers to take out student and auto loans instead.

An upturn in delinquent credit card debt is a concern to the Fed, since it has occurred during a period of job market strength. The culprit might be that workers may not be earning more, but just working more.

Sources: Federal Reserve Bank of New York

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