Consumer credit increased by nearly $30 billion, experts expect record delinquencies in 2023

Consumer credit increased by more than $20 billion by the end of 2022.

Consumer credit increased at the end of 2022 amid high inflation and a rising interest rate environment, studies show. Total consumer credit rose by 7.1% or $28 billion in November, according to the latest data from the Federal Reserve. Driven primarily by credit cards, revolving credit increased by 16.9%, the Fed reported. 

Experts believe 2023 will see a record increase in credit card delinquency rates. In fact, credit card delinquency rates may rise to levels not seen since 2010, according to the 2023 Consumer Credit Forecast by TransUnion.

The credit bureau expects serious credit card delinquencies to increase to 2.6% by the end of 2023 from 2.1% at the closing of 2022. In addition, the average American's personal savings rate as of November 2022 was 2.4%, the lowest it has been in more than a decade. 

If you’re having trouble paying down high-interest credit card debt, consider paying it down with a personal loan at a lower interest rate to help reduce your monthly payments. You can visit Credible to get your personalized rate without affecting your credit score. 

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Americans may keep turning to credit cards in 2023

Last year, as Americans dealt with rising prices, credit card balances saw a $38 billion increase since the second quarter and spiked by 15% year-over-year, according to a report by the New York Federal Reserve. That marked the largest year-over-year increase in more than two decades. 

Still, industry experts believe Americans will open more credit cards in 2023 than the previous year. 

"The number of new cards opened will remain much higher than at any time in the last decade," TransUnion said in its 2023 credit forecast report. 

Of the 26% of Americans who said they plan to seek new credit, more than half (53%) plan to apply for a new credit card, according to TransUnion’s consumer pulse survey. That is more than double for all other credit types including car loans and mortgages.

"Although consumer sentiment remains low, workers are confident in their job situations and willing to spend and absorb more debt," Curt Long, National Association of Federally-Insured Credit Unions (NAFCU) chief economist and vice president of research, said in a statement.

If you’re struggling with high-interest debt, you could consider paying it off with a personal loan at a lower interest rate. You can visit Credible to compare loans from different lenders at once.

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Interest rates expected to keep rising in 2023

Americans who take on more credit in 2023 may see higher than favorable interest rates. The Federal Reserve expects to keep increasing interest rates in 2023 to fight inflation. Most recently the Fed spiked interest rates by 75 basis points in November. 

"We continue to anticipate that ongoing increases will be appropriate in order to attain a stance of monetary policy that is sufficiently restrictive to return inflation to 2% over time," Fed Chairman Jerome Powell said in a December press conference.

However, interest rate hikes may slow down throughout 2023 after the annual level of inflation improved for the sixth straight month in a row in December.

Inflation rose by 6.5% year-over-year in December, which marked a slowdown from a 7.1% increase in November. However, any increase in interest rates by the Fed may also reflect increases in the interest rates of consumer products like credit cards, student loans and mortgages. 

If you’re having trouble making your home payments, you could consider refinancing your mortgage to a lower interest rate before rates potentially increase. You can visit Credible to speak with a mortgage refinance expert and see if this option is right for you. 

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