WASHINGTON–Just in time for their holiday spending, U.S. consumers increased their total debt load by $78 billion during the third quarter, according to WalletHub’s analysis of newly released data from the Federal Reserve Bank of New York.
The third-quarter increase brings total household debt to $17.3 trillion entering the expensive holiday season, WalletHub said.
“Consumers typically rack up the most debt during the fourth quarter of the year as we spend excessively on holiday gifts and travel, so it’s not a good sign when we enter the final few months of the year with a lot of new debt,” John Kiernan, WalletHub editor, said in a statement. “Given how Q3 played out, WalletHub is now projecting that U.S. households will end the year with $350+ billion more debt than they started with.”
In its analysis, the company stated, “The U.S. household debt situation certainly could be better, but when you compare current debt levels to the past and adjust for the unusually high inflation we’ve been experiencing, there’s reason for optimism. For example, WalletHub’s report found that the $78 billion in debt added during the third quarter was actually a 77% decline year over year.”
The Takeaways
According to WalletHub, takeaways from its latest household debt data include:
- Face Value. Household debt is at a record high ($17.3 trillion), but when you adjust for inflation, the total is 7% below its peak from 2008.
- Projection: U.S. households will end the year with $350+ billion more debt than they started with, according to WalletHub.
- Household Average. The average household owed a total of $145,319 at the end of Q3 2023, only $13,631 below WalletHub’s projected breaking point for household finances.
- Total Debt to Deposits. The ratio between total household debt and deposits has been going down over the years, and it is still below pre-Covid levels as well as roughly 53% below the peak from the early 2000s, WalletHub said.
- Total Debt to Assets. The ratio between total household debt and assets has been dropping steadily, reaching 9.8% in Q3 2023, which is about 42% below the peak.
The Real Issue
“The issue with household debt right now is not the total amount we owe, which is actually fairly healthy compared to historical levels, considering how low the total debt-to-deposits and debt-to-assets ratios are,” Kiernan added in a statement. “The cost of our debt is what’s really out of whack right now, as interest rates on credit cards and some loans are in record territory. People sometimes forget the cost element when considering household debt, especially when it comes to debt with a variable interest rate, and this can lead to delayed sticker shock and ability-to-pay concerns.”
Developments by Type of Debt
According to WalletHub, developments by type of debt include:
- Mortgages. Mortgage debt increased by roughly $20 billion in Q3 2023. That’s 92% less than last year but the second smallest third-quarter increase since 2004.
- Auto Loans. Auto loan debt fell by $1 billion in Q3 2023. That’s 104% less than last year and the smallest third-quarter paydown since 2004.
- Credit Cards. Credit card debt increased by $39 billion in Q3 2023. That’s 3% more than last year.
- Student Loans: Student loan debt increased by $16.2 billion in Q3 2023. That’s the fourth smallest third-quarter increase since 2004.
- Other Debt. Other types of debt, like personal loans, decreased to roughly $529 billion in Q3 2023. That’s around $285 billion below the record high, according to WalletHub.
As Winter Approaches, the Price for the Best Daily News Update in Credit Remains a Nice, Cozy Free!
The biggest, best and freshest news reporting in credit unions remains free! Each morning CUToday.info delivers its daily Fresh Today news update offering the latest headlines and breaking news right to your email, with the easy-to-read headlines format allowing you to click on the stories that interest you most in order to learn more. So stop paying those bank-fee-like subscription prices from other so-called “news” publications!
If you haven’t yet signed up for the new email solution on which CUToday.info has partnered with ResponseGenius, you can do so here. Signing up requires less than one minute of your time—and it’s free!
Please note that after signing up you may need to go to your Spam/Junk folder and mark the morning headlines email as safe. CUToday.info does not provide its list of readers and emails to outside parties, and we will not be contacting you to sell you an extended warranty or sending you any links so you may cash in on an inheritance you didn’t know was coming.
And did we mention it’s free?