Yesterday we discussed the latest consumer credit data, which revealed that the amount of credit card debt across the US has hit a new record high of $1.337 trillion (even though it appears to have finally hit a brick wall, barely rising in March by the smallest amount since the covid crash), even as the savings rate has tumbled to an all time low.

To be sure, credit card debt is just a small portion (~6%) of the total household debt stack: as the next chart from the latest NY Fed consumer credit report shows, the bulk, or 70%, of US household debt is in the form of mortgages, followed by student loans, auto loans, credit card debt, home equity credit and various other forms. Altogether, the total is a massive $17.5 trillion in total household debt.

But staggering as the mountain of household debt may be, at least we know how huge the problem is; after all the data is public. What is far more dangerous - because we have no clue about its size - is what Bloomberg calls "Phantom Debt", and we have repeatedly called Buy Now, Pay Later debt. How much of that kind of debt is out there is largely a guess.

Let's back up: the topic of Buy Now, Pay Later, or installment debt, is hardly new: we have covered it extensively in the past year, as this selection of articles reveals:

"Buy Now, Pay Later" Mania Sends Americans Deeper Into 'Black Hole' Of Debt: April 2023

Consumers Use 'Buy-Now, Pay-Later' Option To Fund Record Black Friday Purchases: Nov, 2023

BIS Reveals 'Buy Now, Pay Later' Use Is Soaring Among Working Poor Youngsters: Dec 2023

Self-Checkout Kiosks At 4,500 Walmarts Now Offer 'Buy Now, Pay Later' Loans For Basic Items: Dec 2023

Many Are Addicted To "Buy Now, Pay Later" Plans, It's A Big Trap: Feb 2024

But while it is easy to ensnare young, incomeless Americans into the net of installment debt where they will rot as the next generation of debt slaves for the rest of their lives, there is an even more sinister side to this extremely popular form of debt which allows consumers to split purchases into smaller installments: as Bloomberg reports in a lengthy expose on installment debt, the major companies that provide these so called "pay in four" products, such as Affirm Holdings, Klarna Bank and Block's Afterpay, don't report those loans to credit agencies. That's why Buy Now/Pay Later credit has earned a far more ominous nickname:

It's hard enough for central bankers and Wall Street traders to make sense of the post-pandemic economy with the data available to them. At Wells Fargo & Co., senior economist Tim Quinlan is particularly spooked by the "phantom debt" that he can't see.