According to the New York Federal Reserve, household debt in the second quarter of 2023 reached $17.06 trillion, showing an increase of $16 billion compared to the previous quarter. However, there were efforts made by many U.S. households to reduce debt, with nearly $170 billion paid off in the quarter. This amount is 21% higher than in the first quarter, as reported by WalletHub. In the first quarter, consumers paid back $141 billion in debt, but in the second quarter, they managed to pay off even more. Although the figures are down 5% from the previous year, when consumers paid back almost $180 billion, the overall debt continues to rise. In fact, credit card debt alone has surpassed $1 trillion as of the beginning of the third quarter. Despite the challenges posed by high inflation and pricing pressures, consumers have shown determination to overcome their debts. Specifically, mortgage debt and student loan debt have seen the most significant reductions. Student loan debt has been decreasing since the first quarter of 2021, with the current average debt standing at $13,219. This decline coincides with the introduction of the student loan payment pause in 2020, which temporarily halted interest accumulation on federal student loans. In the second quarter, student loan debt decreased by $52.6 billion, marking the second-largest paydown since 2004. Additionally, household mortgage debt experienced a substantial decrease, with consumers paying off $161 billion. The average mortgage debt now sits at $101,222, slightly higher than the previous year’s second quarter average of $98,789. On the other hand, auto loan debt saw an increase of $3 billion in the second quarter of 2023, which is the first quarterly increase since 2020. This growth follows consumers paying off $12 billion in the same quarter last year, and the average auto loan debt balance is currently $13,329. Credit card debt also experienced a rise, with a 4.6% increase in the second quarter, reaching a total of $1.03 trillion. Consumers added $45 billion in credit card debt, making it the highest category of debt. Additionally, it has the highest 90+ day delinquency rate at 5.08%, showing an increase of 1.73% in delinquencies compared to the second quarter of the previous year. Joelle Scally, the Regional Economic Principal at the New York Fed, stated that while delinquency rates have slightly increased, they seem to have returned to pre-pandemic levels. To summarize, despite the progress made in paying down mortgages and student loans, U.S. households are taking on new auto loans and facing challenges in reducing credit card debt balances. As a result, the total household debt has reached $17.13 trillion at the beginning of the third quarter, as reported by WalletHub.
Despite an Overall Increase, Consumers Successfully Eliminated $170 Billion in Debt During Q2
