If retail business owners notice shoppers agonizing even more than usual about making a purchase, it's probably not just the effects of two straight years of relentless, inflation-driven price hikes. Consumers now carry record-high levels of credit card debt, resulting in payment delinquency levels not seen since 2012, hardly a signal of a coming spending boom. 

In its regular Quarterly Report on Household Debt and Credit released this week, the Federal Reserve Bank of New York said U.S. consumer credit card balances rose to a record-high $1.14 trillion during the second-quarter of 2024. That's $27 billion more than the previous three-month period, and $111 billion higher than the second quarter of 2023. According to credit reporting agency TransUnion, total plastic-generated debt averages $6,329 per credit card holder, representing an annual 4.8 percent increase. 

Just over 9 percent of those bloating credit card balances "transitioned into delinquency" over the last 12 months, according to the New York Fed. The "serious" cases--defined as accounts that are 90 days late or more on payment--increased from 5.08 percent in the second quarter of 2023 to 7.18 percent during the same period this year, it said.

That evolution may be significant to retailers and other business owners already seeing sales slow as inflation-rattled consumers tighten their spending. The reason: Not only is that level of primary credit card debt heavier than ever, but with average card interest rates now over 27.6 percent, their total costs climb even higher.

Increasing delinquency rates, meanwhile, accentuate consumers' risk of sinking even deeper into debt, as principle, interest, and fees compound. That further reduces their capacities to reimburse creditors--or finance most goods purchases that have been the primary motor of U.S. economic growth for the past three years.

Several factors account for credit card use and total debt reaching historic levels.

Halted, then reduced economic activity at the outset of the pandemic led consumers to slash their use of credit cards in 2021. They then relied largely on government stimulus payments and their own increased savings to finance renewed purchasing activity for much of the next year.

As of 2022, however, binges of so-called "revenge spending" to make up for enjoyment lost to lockdowns helped credit card use surge again--along with debt levels that climbed from $986 billion in early 2023 to $1.14 trillion now.

But increased reliance on credit cards also reflects dwindling savings--which were previously been used to pay for things in cash. As those graph curves crossed and diverged, observers warned that lower-income earners starting to buy even essential goods with plastic, running greater risks of rising debt spirals getting out of hand. That may be driving higher delinquency rates now.

"Higher-risk prime and below segments seem to be experiencing more significant inflationary pressures, and as such relying on their cards more, (which is) evident in increasing balances and higher utilization," said Paul Siegfried, senior vice president at TransUnion in comments on the company's recent report. "We expect delinquency rates to continue to rise, though the growth rate should decelerate."

Why that final optimistic note? Because as TransUnion's report points out, even as many lower-income consumers are "using credit products... to bridge the financial gaps that may exist in many household budgets," they're likely to soon get a bit of relief. That, the study adds, should come "in the form of rate cuts" if--as expected--U.S. Federal Reserve intervenes to cut interest rates soon.

That, to be sure, won't preclude the heaviest lifting of consumers paying off their principal on credit card debt. But it should somewhat blunt the bloating effects of high interest that add to existing liabilities. Over time, that could provide people with a little more financial breathing room--and a growing capacity to buy things without so much hesitation.