US household debt hits an all-time high

Household debt in the United States hit a record high of $18.8 trillion in the first quarter of the year, a report by the Federal Reserve Bank of New York found, as some consumers found it increasingly difficult to pay their bills and manage their debts.

The findings from the quarterly report on household debt and credit, released in mid-May by the Federal Reserve Bank of New York's Center for Microeconomic Data, said that US households owed money on mortgages, credit cards, autos and student loans. The overall increase in debt was driven by higher balances on auto loans and mortgages.

"It's a struggle to keep our finances in check," Sarah, 39, a married mother-of-two from Brooklyn, New York, told China Daily. She admitted feeling "embarrassed" about how high her debt was and declined to give her surname.

"With our mortgage payment and what we owe on our credit cards, student loans and the cost of having two young kids under five, it's a lot. We feel like we're barely above water some months. My husband works full-time, I'm a freelancer. It gets me down, yes, it feels embarrassing for sure."

The New York Fed said that mortgage balances rose $21 billion in the first quarter and totaled $13.19 trillion at the end of March. Credit card balances fell by $25 billion but stood at $1.25 trillion. Auto loan balances increased by $18 billion to $1.69 trillion in the first quarter of the year.

Carlos Savala, 71, originally from Costa Rica, lives in Manhattan, New York in subsidized housing. The retiree, who used to work in the Rockefeller Center, is fed up with the cost of everything, especially food, and gets free meals from a food pantry in midtown three days a week.

"Everything is expensive! It all costs more to me, especially food. I don't cook. This place helps me out on Tuesday, Wednesday and Thursday. I'm very thankful to them for what they do," Savala said. "On the other days, when they're not open, I go to other places … You've got to pull back on the nice things to afford the basics and your bills."

Rising inflation

The rise in household debt came as inflation rose for a second consecutive month, data from the US Bureau of Labor Statistics shows.

The Consumer Price Index rose at a seasonally adjusted 0.6 percent in April, making the one-year pace 3.8 percent — its highest level since March 2023.

Rising gasoline and energy costs linked to tensions in the Middle East contributed to the increase in inflation, according to analysts and recent market data.

The national average cost of a gallon of regular gas was $4.53($1.20 per liter), the highest level since 2022, the American Automobile Association said on Tuesday.

Arnold P., 55, an economist and financial adviser from Brooklyn, New York, withheld his surname to protect the anonymity of his clients. He advises clients on tight incomes to focus on paying the essentials first and then tackle their debt.

"I see a lot of people who have massive amounts of debt," he said. "It's usually a mortgage, or rent, credit card debt and college loans combined, which means they find that their debt-to-income ratio is too high, exceeding 40 to 50 percent. Some are in serious financial trouble. Many really need my help."