Lee Munson, President and CIO of Portfolio Wealth Advisors, talks about the market, March CPI, and earnings season.
Americans are drowning in credit card debt.
new Published data A survey by the Federal Reserve Bank of Philadelphia shows that more Americans are struggling to make their monthly credit card payments as the battle against high inflation and interest rates continues.
All stages of credit card delinquency (30-day, 60-day, and 90-day delinquency) rose to their highest level since 2012 in the fourth quarter of 2023. The researchers noted that credit card performance typically worsens at the end of the year. Consumers increase their holiday spending.
Nearly 3.5% of card balances were at least 30 days past due at the end of December, an increase of about 30 basis points from the previous quarter. The proportion of debts that were 60 and 90 days late also rose.
Rising inflation is costing Americans an extra $1,000 a month.
Cardholder stress was “further accentuated in payment behavior,” the report said. The percentage of accounts making minimum payments rose 34 basis points (bp) from the third quarter.
The Biden administration’s new rules put an $8 cap on late payment fees on credit cards. (Photo by Matt Cardy/Getty Images/Getty Images)
Although the percentage of Americans who pay off their credit card balances in full increased by 8 basis points, the 3.1% increase in revolving balances carried over from month to month suggests that “a small group of revolvers are increasing their card balances.” There is.”
“Q4 2023 was the worst card performance in the series,” the report said. “All levels of account-based delinquency reached record highs. Only balance-based interest rates above 90 were below series highs set more than a decade ago.”
As a result of the surge in delinquencies, banks have increased their credit facilities less and cut them more frequently.
Increased credit card usage and debt are particularly concerning. level of interest It is now at an astronomical height. The average annual percentage rate (APR) for credit cards held steady at an all-time high of 20.75% last week, according to the Bankrate database dating back to 1985. The previous record was 19% in July 1991.
Why are groceries still so expensive?
If people take on debt to cover higher prices, goods can become more expensive to buy in the long run. For example, if you owe $5,000, as the average American does, at current annual interest rates, it would take about 279 months and $8,124 to pay off your debt with minimal payments. Interest will be charged.
People shop at a hardware store in Brooklyn, New York City, January 25, 2024. ((Photo by Spencer Pratt/Getty Images)/Getty Images)
The increase in delinquency is federal reserve An aggressive interest rate hike campaign aimed at quelling stubborn inflation and cooling the economy.
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Policymakers say they plan to cut interest rates later this year, but not until they are confident inflation has been overcome.
nevertheless inflation has subsided According to the latest data from the Labor Department, wages have risen 3.5% in recent months compared to the same period a year ago.
Rising inflation is putting severe financial pressure on most American households, forcing them to pay for necessities like food and rent. The burden falls disproportionately on low-income Americans, whose already maxed-out paychecks are heavily affected by price fluctuations.
