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November 28, 2023

Credit card balances spiked in the third quarter to a record $1.08 trillion. Here’s how we got here.

The all-time high in credit card balances was fueled by several factors. First, consumer spending rose sharply in the third quarter as the economy began to rebound from the pandemic-induced recession. This meant more Americans were relying on their credit cards to cover necessary purchases, as well as discretionary spending. Second, lenders responded to the unprecedented economic circumstances by approving more credit. Federal stimulus checks and programs like the Paycheck Protection Program (PPP) also encouraged consumers to borrow money to help them through the pandemic. Finally, the low interest rates enabled more borrowers to carry higher balances. Credit card companies often set low introductory rates to attract new customers, but those rates eventually rise as the consumer’s total balance grows. The relatively low interest rates in the third quarter allowed more consumers to keep larger balances without being overwhelmed by interest payments. Together, these factors helped to drive U.S. credit card balances to a record high in the third quarter. In the coming months, the balance is likely to dip slightly as consumers begin to pay back their balances, but it is still expected to remain at historically high levels.