Credit Card Debt Piling Up as Spending Jumps
According to a report, credit card loan defaults have soared by 50% in the first three quarters of 2024 compared to the same period last year, reaching $46 billion in seriously delinquent loans. This marks the highest level since 2010. The figure is an increase from $31 billion in the first three quarters of 2023.
The report from the Financial Times, citing data analyzed by BankRegData, suggests that consumer debt is piling up, with credit card debt reaching a record high in September, according to the New York Federal Reserve. The report also shows that total household debt has climbed to a new high of $17.94 trillion, with balances on mortgages, auto loans, and student loans also at record highs.
Experts are warning that the credit card debt bubble is about to burst, with high-income households being fine but the bottom third of US consumers being tapped out. Mark Zandi, head of Moody’s Analytics, stated, “High-income households are fine, but the bottom third of US consumers are tapped out. Their savings rate right now is zero.”
The New York Federal Reserve researchers have pointed to the growth in debt balances across the board, the persistent and concerning growth in auto loan and credit card delinquencies, and how stresses and high delinquency rates are concentrated among younger borrowers. They have also noted that the rise in payments consumers are making on credit cards and auto loans is attributed partly to inflation and also due to higher interest rates.
