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Understanding Retail Credit Card Debt and Buy Now, Pay Later Trends
Total Retail Credit Card Debt Increased by 6.7%
In 2023, the landscape of consumer finance saw significant changes, particularly in the realm of retail credit card debt. Despite a moderation in inflation, the average balances on store credit cards increased by 6.7% from the previous year, reaching $126.9 billion by the end of the third quarter. This rise occurred even though the number of retail credit card accounts decreased.
Those With Poor Credit Scores Growing Their Balances the Fastest
Consumers with lower credit scores experienced the most significant increases in their retail card balances. For instance, those with poor credit scores saw their balances grow by 18.6%, reaching $1,608. This trend is partly due to the higher interest rates on these cards, which can exceed 30% APR.
Average Retail Card Balances Rose Nationwide
Across the United States, the average retail card balance increased in every state and Washington, D.C. Texas had the highest average balance, while Hawaii had the lowest. States with robust economic growth, such as Illinois, Massachusetts, and Oregon, saw the most significant increases, with balances rising by more than 10% in 2023.
Younger Generations Add to Their Retail Card Balances, Despite Buy Now, Pay Later
Interestingly, younger generations, including Generation Z and Millennials, contributed significantly to the increase in retail card balances. Despite the growing popularity of buy now, pay later (BNPL) options, Generation X still holds the largest average balance at $1,528.
More Consumers Consider Buy Now, Pay Later an Option
With rising interest rates, many consumers are turning to BNPL options as a more convenient and cost-effective form of financing. According to a study by the Federal Reserve Bank of Boston, 77% of consumers are aware of BNPL plans, and more than half have been offered this payment option recently. BNPL is particularly popular among high earners and those with fluctuating incomes, such as gig economy workers.
Retail Card Spending Is Much More Modest Than Other Credit Card Spending
Despite the increase in retail card balances, their role in the overall economy remains modest. The $127 billion in retail card debt is only about one-eighth the size of outstanding credit card debt. However, BNPL options are growing in popularity, especially among younger consumers, indicating a shift in how people manage their finances.
How O1ne Mortgage Can Help
At O1ne Mortgage, we understand the complexities of managing debt and finances. Whether you’re dealing with high-interest retail card balances or exploring BNPL options, our team of experts is here to help you navigate your financial journey. Contact us today at 213-732-3074 for personalized mortgage services and financial advice.
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