U.S. credit card defaults have risen to their highest level since the 2008 financial crisis, as consumers suffer from years of high inflation.
credit card lender I wrote it down Loan delinquency balances in the first three quarters of 2024 were $46 billion, an increase of 50% year over year. These forms of write-offs are considered a closely monitored measure of the lending crisis.
This is the highest level since 2010, according to industry data collected by BankRegData.
“High-income households are doing well, but the bottom third of American consumers are being exploited,” said Mark Zandi, head of Moody's Analytics. Their current savings rate is zero. ”
of financial times The bank wrote that it does not have data for the fourth quarter, but there are worrying signs about the state of American consumers.
The surge in debt defaults shows that long-standing consumers' personal finances are becoming increasingly strained. high inflationand because the Federal Reserve leaves borrowing costs high.
Banks have not yet reported fourth-quarter numbers, but there are early signs that more consumers are falling deeply behind on their debts. Capital One, the third largest company in the US credit card The lender, which follows JPMorgan Chase & Co. and Citigroup Inc., recently reported that the rate of charge-offs on credit cards marked as uncollectible as a percentage of its total loans reached an annual rate of 6.1% as of November, up from 5.2% a year ago. announced. .
“The purchasing power of consumers is decreasing,” said Odyseas Papadimitriou, head of consumer credit reporting company WalletHub.
Americans came through the coronavirus pandemic with large cash balances, buoyed by high levels of economic stimulus. However, credit card balances began to skyrocket in 2022 and 2023. A surge in American consumer spending, along with supply chain shocks and excessive spending under President Joe Biden, has led to high inflation.
In response, the Federal Reserve raised interest rates, causing credit card interest rates and other borrowing costs to rise. Rising loan balances and interest rates mean Americans will pay $170 billion in interest starting in September 2024.
Many Americans continue to expect the Federal Reserve to lower interest rates, resulting in lower borrowing costs. However, the Fed predicts that the nation's central bank may end up cutting interest rates by just half a percentage point in 2025.
“Delinquency suggests more suffering ahead,” Papadimitriou said.
Sean Moran is a policy reporter at Breitbart News. Follow him on X @SeanMoran3
