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Credit card debt is at an all-time high in the United States, and the world's wealthiest person is speaking out about it. Elon Musk recently weighed in on people's struggles to make ends meet in the current economic climate.
Musk said earlier this month that people's credit card debt is "looking scary" at the moment, in response to a question about Tesla lowering the prices of its cars to make them more affordable. This question came up during Tesla's Q2 2023 financial earnings call.
"For a lot of people, they're just really breaking even every month," Musk said. "In fact, if you look at the rise in credit card debt, they are, in fact, not breaking even every month. Credit card debt is looking scary."
In this case, Musk isn't wrong. The boom-bust cycle of the pandemic economic recovery has hit a new snag, with Americans spending much more than they might actually be able to afford.
In July, credit card debt soared to record highs, according to recent data from the Federal Reserve. The record highs come after months of Americans taking on ever-increasing debt, a marked departure from the plunge seen in the wake of March 2020 and dips that continued through mid-2021.
According to recent data from Credit Karma, Gen Z and millennials have experienced a significant increase in credit card debt in the second quarter of 2023. Average credit card debt for Gen Z now exceeds $3,300 — a 4.2% rise — while millennials hiked up credit card debt by 2.5% to an average of nearly $7,000.
That record-high credit card debt comes as Americans see their savings deplete and pandemic-era financial cushions evaporate. Data from the JP Morgan Chase Institute shows that, across around 9 million Chase customers, cash balances in checking and savings accounts have hit their lowest levels since April 2020.
As student loan payments restart, balances and debt might deteriorate further; the Consumer Financial Protection Bureau found that nearly 8% of borrowers have fallen behind on other payments.
The earnings call was not Musk's first warning about debt in the US. In December he tweeted, telling people to "beware of debt in turbulent macroeconomic conditions."
Musk is no stranger to debt. His company X Corp, which was created to take Twitter private when Musk purchased the social network back in October, took on $12.5 billion in debt in order to close the deal.
Like high-interest credit card debt, the interest payments on the $12.5 billion X owes can't be shrugged off — in Musk's case, the interest payments alone are hundreds of millions per quarter. X, previously Twitter, reportedly began making interest payments in January, paying around $300 million in interest alone, according to Bloomberg. X reportedly made a second payment of around $300 million in May.
