Credit card defaults are at their highest level since 2010 as consumers feel increasingly stretched.
As the Financial Times (FT) reported On Sunday (Dec. 29), card lenders wrote off $46 billion in seriously delinquent loans in the first nine months of this year, a 50% increase compared to 2023. This level is the highest in 14 years, the report said, citing industry data compiled by financial institutions. BankRegData.
These write-offs occur when lenders determine that a borrower is unlikely to repay a debt, and are considered a measure of a major lending crisis, according to the report.
“High-income households are doing well, but the bottom third of American consumers are being exploited.” Mark Zandihead of Moody's Analytics. “Their current savings rate is zero.”
FT, this default surge is financial pressure After years of rising inflation and rising borrowing costs, consumers are faced with:
Although banks have not yet released fourth-quarter results, there are early signs that more consumers are being left behind, the report adds. for example, capital one recently announced that its credit card charge-off rate, the percentage of total loans considered uncollectible, reached 6.1% annually, up from 5.2% a year ago.
“Consumer purchasing power is declining” Odysseus Papadimitriouhead of a consumer credit reporting company wallet hubhe told FT.
As we covered here earlier this month, the percentage of consumers with at least some credit card debt is widespread at 74.5%, according to a PYMNTS Intelligence study. This percentage is more or less constant depending on income level, but jumps to over 90% For consumers living paycheck to paycheck and struggling to pay their bills.
As a result of the research, average balance Cardholders with paycheck-to-paycheck issues have an average outstanding balance of $7,038, while those who live paycheck-to-paycheck without such challenges have an average outstanding balance of $5,766 .
For financially stable cardholders, the average drops to $3,202. The study also showed that about 40% of struggling consumers reach their limits with some regularity.
Meanwhile, recent Federal Reserve data shows that the U.S. credit card debt It continues to increase, reaching $5.113 trillion in October, compared to $5.093 trillion in September.
And data from the November Credit Access Survey released by the New York Fed showed consumers have more money. Difficulty accessing credit Auto loans and home loans, especially for consumers with low credit scores.
“Reported denial rates for credit cards, mortgages, auto loans, credit card limit extension applications, and mortgage refinance applications all increased in 2024,” the New York Fed said in a press release accompanying the data.
