New report indicates opening a new credit card could become more difficult

New data released by TransUnion this week indicates that the average credit card borrower now carries a balance over $6,000.

The data shows there are 170.1 million Americans carrying a credit card balance, as of the second quarter of 2024. In the second quarter of 2024, they carried an average balance of $6,329, which marks about a 5% increase from the year before.

In 2021, the average debt per borrower was $4,828.

TransUnion's report says that more American consumers are turning to credit cards to "help manage in this challenging economic environment." The report also notes that 2.26% of accounts were over 90 days delinquent in the second quarter, an increase of 0.2 percentage points from 2023.

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“A more pronounced divergence appears to be occurring when it comes to how different consumer segments are faring in this economic environment, and in particular, how they are using their credit cards," said TransUnion Senior Vice President Paul Siegfried in a statement. "Higher-risk prime and below segments seem to be experiencing more significant inflationary pressures and as such, relying on their cards more, evident in increasing balances and higher utilization."

Credit card companies expected to become more stingy

There are indications that a rise in delinquencies could make credit card companies more hesitant to issue new accounts. There were fewer new accounts issued in the first quarter of 2024 as compared to the same time in 2022 and 2023.

"Originations will likely continue to decline for mid-tier and worse consumers as issuers look to less risky borrowers. We expect delinquency rates to continue to rise, though the growth rate should decelerate," Siegfried said.

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Despite there being fewer credit cards being issued in 2024, those with super prime credit scores – generally above 720 – have been opening more accounts than in past years.

Is credit card data an indicator of a falling economy

If the recession of 2008-09 is any indicator, credit card data can be an indicator of the health of the U.S. economy.

In 2009, federal data shows that the delinquency rate for credit cards from commercial banks reached a high of 6.77%. That rate quickly declined to below 3% in 2012, although many economists say the U.S. recovery took much longer.

One reason delinquencies dropped quickly even though the U.S. economy was only seeing a modest recovery was likely due to banks issuing fewer credit cards to consumers with poorer credit scores.

Although the U.S. unemployment rate is below historical averages, i t has crept up in the last year. The unemployment rate reached 4.3% in June, which is 0.8 percentage points higher than last July.