Americans are swiping their way deeper into debt.
The number of consumers who have access to a credit card — meaning those who either have a card themselves or are authorized users on a card — hit a record high of 178.6 million at the close of 2018. That means four million new people gained access to plastic during 2018, according to data released Thursday from credit reporting agency TransUnion.
The group who saw the biggest increase in new cards was the group who likely will have more trouble affording those cards: subprime borrowers. This cohort typically has less-than-stellar credit and is likely to face a higher interest rate because of it. Over the course of 2018, the number of credit cards opened by subprime borrowers increased 9.6%, compared with minimal or negative growth for all other groups.
This wouldn’t be so bad, of course, if the balances weren’t also increasing. But they are. “Overall, balances grew by 4.9% year-over-year, with growth occurring across all risk tiers for the 19th straight quarter,” the report reveals. The subprime group saw theirs grow even more than that: 7.2%, which was the highest of any group. (Though it’s important to note that the super prime borrowers, who are the least risky, grew 6.8%, the second highest. TransUnion says that this growth was attributed to “an increase in the number of above prime consumers with access to a credit card coupled with continued spend.”)
The average credit card balance is now $5,736, up more than 7% in the past three years. And now the total amount of unpaid revolving debt (this is usually credit card debt) hit a record $1.044 trillion at the end of 2018, according to the Federal Reserve.
Plus, serious delinquencies are on the rise, hitting 1.94%, up from 1.54% in the fourth quarter of 2015, TransUnion revealed.
Still, it’s important to note that these delinquency rates are still well below recession-era levels, explains Matthew Komos, the vice president of financial services and consulting for TransUnion. But he cautions that “we’ve been in a lower [interest] rate environment for a while, so the payments needed to keep up have been kept in check. As interest rates go up, we have to see how that will effect people.”
In short, there are some not-so-great signs that we’re taking on more debt and some of us are struggling to pay for it. If you find yourself in that category, there are simple things you can do to get out of debt. One of the simplest pieces of wisdom: Get the lowest interest rates you can on your credit dates and the pay as much as you can on the highest interest debts, the minimums on all others and do this until your debts are repaid.
And Kimberly Foss, a certified financial planner and the founder of Empyrion Wealth Management, adds that “if have a HELOC on your home you can borrow against that and pay off the credit card debt I’m sure it’ll be a lot less interest rate than credit card debt. On the HELOC you can get a variable or fixed rate and that way you can fixed interest rate on the HELOC as interest rates go up.” Just be sure you can pay them both off.