According to the Philadelphia Fed, Americans are not doing well financially.
The percentage of active credit card accounts with only minimum payments reached a 12-year high of 10.75% from July to September 2024, based on data from the country's largest banks. The Philadelphia Fed stated: on wednesday. As credit card balances have increased, the rate of delinquent balances has also worsened.
Despite widespread economic data showing that consumers remain resilient and spending is strong, these data paint a different picture.
“These credit card data show warning signs of consumer stress,” said Andrew Kish, assistant vice president of the Financial Oversight Group at the Philadelphia Fed. “More borrowers are delinquent on their credit card payments…We will be closely monitoring these performance indicators in the coming quarters to monitor the health of our consumers.”
Why does the data tell such different stories?
Broad economic indicators and statistics lump all consumers together in so-called aggregate data, which can ignore the unique experiences of consumers at different income levels, economists say.
Earn rewards as you spend: See the best credit cards
“The unfortunate truth is that higher-income consumers can largely offset the hardships of lower-income consumers,” Wells Fargo economists said. in report Early this month. For higher-income consumers, “overall consumer spending this year could still be above 2%, indicating 'business as usual' in a situation that is not normal for large parts of the population.”
Economists say low-income consumers are becoming more dependent on credit and lowering their savings rates.
Savings rates for low- and moderate-income households turned negative in early 2022 as consumers used rainy day funds for the better part of two years, according to Wells Fargo. Savings have turned positive again, but remain below pre-pandemic levels.
“Today looks like a lot of spending, but it comes at the expense of the more fragile finances of the working poor,” they said.
How bad is it for the average American?
According to Resume Now magazine, of the 1,065 workers surveyed in December, 73% were struggling to pay more than basic living expenses, and about a third were struggling to make ends meet. He is said to be borrowing money to cover the costs. 2025 Wage Status Report.
Households with revolving credit card debt carry an average of $10,563 in debt. Nerd wallet survey 2,000 adults participated.
“It's more costly to carry that debt now than it was in the era of low interest rates, and some households are simply struggling to service those outstanding debts,” Wells Fargo economists wrote. said.
From July to September 2024, revolving card balances reached $645 billion, an increase of 52.5% from a 10-year low of $423 billion in mid-2021, according to data from the Philadelphia Fed. . Total card balances rose to $914 billion, the highest since 2012, when the Philadelphia Fed began tracking this data.
“Not only are consumers spending more and carrying higher balances, they are also paying less and increasing their revolving debt,” the Philadelphia Fed report said.
Credit card balances past due for 30 days or more also rose to 3.52% from July to September 2024, double the lowest delinquency rate of 1.57% from April to June 2021 during the pandemic, according to the Philadelphia Fed. That's all.
Will Americans be able to catch up?
Erasing credit card debt isn't easy, as some Americans tracked by USA Today showed last year. But here's what you should try, according to experts.
- Whenever possible, pay at least the minimum amount on your credit card balance. Otherwise, consumers could end up in debt for decades and pay thousands of dollars more in interest.
For example, the average credit card balance is $6,380, according to TransUnion. Assuming your credit card interest rate is 20.27% and you only make the minimum monthly payments, you'll end up paying $9,344 in interest over 218 months (over 18 years) of debt.
- Sign up for a balance transfer card with a generous 0% interest rate. “By paying about $300 a month, you can reduce your average credit card balance to zero in 21 months with no interest,” says Ted Rothman, senior industry analyst at comparison site Bankrate.
- If you have a low credit score or have more than $5,000 in credit card debt, consider working with a reputable nonprofit credit counseling agency such as: money management internationalsaid Rothman. A credit counselor can help you create a payment plan and budget to stay on track.
Medora Lee is USA TODAY's money, markets and personal finance reporter. She can be reached at the following address: mjlee@usatoday.com and Subscribe to the free Daily Money newsletter Get personal finance tips and business news every Monday through Friday morning.
