Americans have charged a record $1 trillion to credit cards and other forms of revolving debt, the Federal Reserve Bank of St. Louis announced last week.

The milestone was reached during the week ending 26 July, up from $998 billion a week earlier.

U.S. consumers have added $193.4 billion to their debt load since this year began, the bank noted.

Credit balances and delinquency rates have been rising in tandem with interest rates.

The average credit card interest rate has soared to 20.53 percent as of 2 August, the highest since 1985, according to Bankrate.com. The U.S. Federal Reserve boosted interest rates again last month, an increase expected to slam into credit cards within the next six weeks.

Americans ages 18 through 29 show the highest delinquency rates in this year’s first quarter, with 8.5 percent in danger of falling at least 90 days behind in their payments, the Federal Reserve Bank of New York said.

People 30 to 39 had a 6.1-percent late rate, while less than 5 percent of people 40 and older are paying late.

The pause in student loan payments enacted during the COVID War, and extended since, is due to end in October, squeezing the budgets of millions of Americans even more and likely forcing more people to rely more heavily on credit to meet basic expenses, The Wall Street Journal said.

“The problem is that if people haven’t had to pay a loan for three years, a lot of people don’t have that money in their budget,” Silvio Tavares, CEO of VantageScore, a credit-scoring service, told the WSJ.

In a June survey by Quicken of 1,002 adults, 41 percent of Gen Zs and 53 percent of Millennials reported living paycheck to paycheck “with no end in sight.”

One way to ease the pain: ask the credit card company for a lower interest rate. Fully 76 percent of those who have done so have seen their rates go down, LendingTree reported. The average reduction was 6 percentage points, which could save $500 or more a year.

TREND FORECAST: As we reported in “Credit Card Debt Nears $1 Trillion, Sets Record” (7 Feb 2023) and “Americans Are Tapping Their Savings to Meet Basic Expenses” (23 Feb 2023), Americans are tapped out: they have shrunk their savings rate from 14 percent or more during the COVID War to 3 percent or less now; many have drawn down their savings and hit their plastic cards to cover basic expenses and inflation and interest rates followed each other higher.

Also as we have often noted, increases in consumer spending typically measures the number of dollars spent, not the volume of goods or services purchased, which have been dwindling for months.

American consumers as a group are reaching the point, if not already there, where discretionary spending is a luxury many will no longer have—especially when student loan payments come due again.

Because consumers sustained 68 percent of the U.S. economy during the first quarter, the steady decline in the volume of items bought will eat into GDP and lead toward a recession, probably before this year ends.