Americans Open Record Number of Credit Cards as Inflation Rises

Credit card debt reaches an all-time high.

As Americans grapple with the highest inflation in 40 years, the number of new credit cards have surged as more Americans rely on them to keep up with high prices. According to a recent report from the Federal Reserve, revolving credit (credit cards and lines of credit) increased by 19.6% from the previous year to $1.103 trillion. This is an all-time high, breaking the pre-COVID-19 record of $1.092 trillion in 2019. Credit card debt dropped to $974.6 billion in 2020 and has been increasing steadily ever since.

New credit cards increase

According to a survey by Equifax, Americans received 11.5 million new bank credit cards through February 2022. This is a 31.4% increase from the previous year. The total limits for these credit cards were $55.5 billion, a 59.2% increase from the previous year. Total credit limits now stand at $4.12 trillion, $224 billion above the pre-pandemic level. 

Credit card balances fell by $15 billion per the Federal Reserve's Quarterly Report on Household Debt and Credit. This is common as people pay down their credit cards from the holiday season. However, this is $71 billion higher than the balances from the first quarter of 2021, representing a large annual increase. 

Mortgage and auto loan balances push up total household debt

Household debt at the end of the first quarter of 2022 increased by $266 billion, 1.7% higher than the previous quarter. Total household debt reached $15.84 trillion, $1.7 trillion higher than at the end of 2019, just before the pandemic. Mortgage loans increased by $250 billion and auto loans by $11 billion. 

While mortgage and auto loan balances increased, the number of new loans decreased in the first quarter of 2022. New mortgages, including refinance loans, reached $859 billion. This is still $197 billion higher than the quarter just before the pandemic hit. The data show that Americans are putting more on their credit cards and taking out fewer mortgages, as they need to borrow more due to high inflation, and respond to rising interest rates.

Mortgages are by far the biggest component of household debt at 71%. The second largest component of household debt is student loans, which stood at $1.59 trillion, a $14 billion increase from the previous quarter. The Fed's report shows how consumers are relying more on credit cards as high inflation has dramatically increased the cost of everything from food and gas to shelter. Americans are taking out less mortgage and auto loan debt as the Fed has raised interest rates, the highest since 2009.