ECON Credit card delinquency rates hit worst level on record

[20Gauge]

Credit card delinquency rates hit worst level on record

A growing number of Americans are struggling to make their credit card payments every month as they continue to battle high inflation and interest rates.

www.foxbusiness.com

Americans are drowning in credit card debt.


New data published by the Federal Reserve Bank of Philadelphia shows that a growing number of Americans are struggling to make their monthly credit card payments as they continue to battle high inflation and interest rates.

All stages of credit card delinquency – 30, 60 and 90 days past due – rose during the fourth quarter of 2023 to the highest level since 2012. The researchers noted that it is typical for credit card performance to deteriorate at the end of the year as consumers ramp up 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 percentage of debts that are 60 and 90 days late also rose.

Stress among cardholders was "further underscored in payment behavior," the report said. The share of accounts making minimum payments jumped 34 basis points from the third quarter.

Although the share of Americans paying off their credit card balance in full rose eight basis points, a 3.1% increase in revolving balances – which carry over from month to month – "implies higher card balances among a smaller group of revolvers."

"Fourth quarter 2023 featured the worst card performance in the series," the report said. "All stages of account-based delinquency reached series highs. Only the 90+ balance-based rate was under its series high, set over a decade ago."


As a result of the spike in delinquencies, banks are granting fewer credit line increases and reducing credit lines more frequently.

The rise in credit card usage and debt is particularly concerning because interest rates are astronomically high right now. The average credit card annual percentage rate, or APR, has been holding steady at a record-high of 20.75% last week, according to a Bankrate database that goes back to 1985. The previous record was 19% in July 1991.

If people are carrying debt to compensate for steeper prices, they could end up paying more for items in the long run. For instance, if you owe $5,000 in debt – which the average American does – current APR levels would mean it would take about 279 months and $8,124 in interest to pay off the debt making the minimum payments.

The rise in delinquencies comes in the wake of the Federal Reserve's aggressive interest rate hike campaign designed to crush stubborn inflation and cool the economy.

Policymakers have signaled they expect to cut interest rates sometime this year, but not until they are confident that inflation is conquered.


Although inflation has cooled considerably in recent months, it remains up 3.5% compared with the same time one year ago, according to the most recent Labor Department data.

The inflation spike has created severe financial pressures for most U.S. households, which are forced to pay more for everyday necessities like food and rent. The burden is disproportionately borne by low-income Americans, whose already-stretched paychecks are heavily affected by price fluctuations.

 

[20Gauge]

Another sign of what is going bad.....

 

[desertvet2]

Do you think ol Joey will forgive the debts made by working people or just the kids who went to a worthless school...?

 

[GeneSD]

The debt and credit crisis is spiraling out of control, showing no signs of abating. Unfortunately, for countless Americans already struggling to make ends meet, the relentless onslaught of Bidenomics spells only further hardship, as their nonexistent cash reserves leave them vulnerable to economic turmoil.

 

[Kathy in FL]

People would rather extend debt and use credit than change spending habits. My parents were one of these. Now we support them because without my dad's military retirement and social security they would be penniless and it still isn't enough to pay the bills so we take up their slack. On some days it gets really hard. No one wants to have to be the gatekeeper for their own parents. Is that loving them or enabling them?

 

[Scrapman]

Inflation has cooled , my ass.

 

[20Gauge]

Do you think ol Joey will forgive the debts made by working people or just the kids who went to a worthless school...?

He does the student loans as they will vote for him.... the cc people? not so sure

 

[20Gauge]

People would rather extend debt and use credit than change spending habits. My parents were one of these. Now we support them because without my dad's military retirement and social security they would be penniless and it still isn't enough to pay the bills so we take up their slack. On some days it gets really hard. No one wants to have to be the gatekeeper for their own parents. Is that loving them or enabling them?

yes

 

[WalknTrot]

It's only going to get worse as interest rates rise, with so many people having adjustable rates. Yikes.

 

[Sacajawea]

So when do they release the 1st Q's numbers?

 

[Blacknarwhal]

People would rather extend debt and use credit than change spending habits. My parents were one of these. Now we support them because without my dad's military retirement and social security they would be penniless and it still isn't enough to pay the bills so we take up their slack. On some days it gets really hard. No one wants to have to be the gatekeeper for their own parents. Is that loving them or enabling them?

Don't know. Don't even much like thinking about it.

 

[cwr]

I can vouch for this I see more accounts past due now then I ever have and maxed out. Amazing change in the past year. I’m glad I’m not in the collections dept!

 

[Tristan]

Ruh, roh!

 

[workhorse]

Had a customer at work go through 4 credit cards before the 5th one worked. They were buying toys. The kids expect something when we go to the store.

 

[colonel holman]

The debt and credit crisis is spiraling out of control, showing no signs of abating. Unfortunately, for countless Americans already struggling to make ends meet, the relentless onslaught of Bidenomics spells only further hardship, as their nonexistent cash reserves leave them vulnerable to economic turmoil.

The plandemic enabled folks to defer their living costs (rent and eviction moratoriums; deferred student load payments; regular stimulus-style checks to support sit-at-home Amazon buying sprees). The easily-stimulated public quickly became addicted to a no-consequences lifestyle they continue to this day. Ending many of these socialist drugs is now creating withdrawal symptoms. Many have not stopped the dependency lifestyle, replacing govt largess with credit cards. Interest rates and consumer hyper-inflation are about to blow all this up. Govt lies about the economy are just encouraging these people to maintain their mindless course of gratification spending. Likely part of the Plan

 

[Melodi]

What are the bankruptcy stats these days? When I worked briefly in the bankruptcy court in 1989, about 50 percent of bankruptcies were medical bills, and maybe 30 to 40 percent were stupid credit card spending. Then there were always the exceptional cases, like a house burned down or the family breadwinner died—that sort of thing.

The medical bill situation may be even worse now. People are encouraged (often by hospital billing departments or credit agencies) to "put the bill on your card." People do this, knowing they can never pay it back (if they have a high enough limit) to stop the constant phone calls and harassment. Of course, they can't pay the credit card bill either, and some of those "credit card" bankruptcies, even in 1989, were medical bill defaults.

I am not saying everyone in the USA overspending on a credit card has unpaid medical bills, but I bet it is a significant part of the problem. This will continue until the US figures out how to make medical care (including ongoing treatment of chronic conditions) affordable. Or, as is happening in rural America, the whole system falls apart except for the extremely wealthy, as hospitals are unable to get their money back from uninsured or underinsured patients (many of whom wait until they are rushed to the ER for treatment) before and close. This goes along with the fiction that Medicare and medicare programs pay hospitals the actual cost of treating those patients, which they don't.

Knowing how much of the credit card debt is medical spending, how much is spent trying to pay the rent/food/electric bills, and how much "stupid spending" is would go a long way towards knowing the root causes of this situation. You can't fix stupid things, but you can do other things.

 

[WTSR]

What are the bankruptcy stats these days? When I worked briefly in the bankruptcy court in 1989, about 50 percent of bankruptcies were medical bills, and maybe 30 to 40 percent were stupid credit card spending. Then there were always the exceptional cases, like a house burned down or the family breadwinner died—that sort of thing.

The medical bill situation may be even worse now. People are encouraged (often by hospital billing departments or credit agencies) to "put the bill on your card." People do this, knowing they can never pay it back (if they have a high enough limit) to stop the constant phone calls and harassment. Of course, they can't pay the credit card bill either, and some of those "credit card" bankruptcies, even in 1989, were medical bill defaults.

I am not saying everyone in the USA overspending on a credit card has unpaid medical bills, but I bet it is a significant part of the problem. This will continue until the US figures out how to make medical care (including ongoing treatment of chronic conditions) affordable. Or, as is happening in rural America, the whole system falls apart except for the extremely wealthy, as hospitals are unable to get their money back from uninsured or underinsured patients (many of whom wait until they are rushed to the ER for treatment) before and close. This goes along with the fiction that Medicare and medicare programs pay hospitals the actual cost of treating those patients, which they don't.

Knowing how much of the credit card debt is medical spending, how much is spent trying to pay the rent/food/electric bills, and how much "stupid spending" is would go a long way towards knowing the root causes of this situation. You can't fix stupid things, but you can do other things.

Just wait for your card to turn off for those 'Stupid Things' that's why the coding for purchases.

 

[Southside]

Had a customer at work go through 4 credit cards before the 5th one worked. They were buying toys. The kids expect something when we go to the store.

Well, that won't go on much longer.

 

[Elza]

It's only going to get worse as interest rates rise, with so many people having adjustable rates. Yikes.

This is something DW and I talk about. The only way many of the people are buying houses is through ARM's. Along with everything going up daily and maxed out/delinquent CC's they are effectively broke. They just don't quite know it yet. They will find out when the ARM interest rates take off. They will be out on the street with no money and no CC's to fall back on. I truly believe that the majority of people haven't a clue as to just how bad it's going to get. We ain't seen nothin' yet!!

 

[ktrapper]

Credit Cards are a poor man’s curse. No good end to using them.
Compounding interest. Either you can be a slave to it, be neutral by just living debt free or you can be on the receiving end by investing.

 

[Knoxville's Joker]

What are the bankruptcy stats these days? When I worked briefly in the bankruptcy court in 1989, about 50 percent of bankruptcies were medical bills, and maybe 30 to 40 percent were stupid credit card spending. Then there were always the exceptional cases, like a house burned down or the family breadwinner died—that sort of thing.

The medical bill situation may be even worse now. People are encouraged (often by hospital billing departments or credit agencies) to "put the bill on your card." People do this, knowing they can never pay it back (if they have a high enough limit) to stop the constant phone calls and harassment. Of course, they can't pay the credit card bill either, and some of those "credit card" bankruptcies, even in 1989, were medical bill defaults.

I am not saying everyone in the USA overspending on a credit card has unpaid medical bills, but I bet it is a significant part of the problem. This will continue until the US figures out how to make medical care (including ongoing treatment of chronic conditions) affordable. Or, as is happening in rural America, the whole system falls apart except for the extremely wealthy, as hospitals are unable to get their money back from uninsured or underinsured patients (many of whom wait until they are rushed to the ER for treatment) before and close. This goes along with the fiction that Medicare and medicare programs pay hospitals the actual cost of treating those patients, which they don't.

Knowing how much of the credit card debt is medical spending, how much is spent trying to pay the rent/food/electric bills, and how much "stupid spending" is would go a long way towards knowing the root causes of this situation. You can't fix stupid things, but you can do other things.

Rural areas will go back to the days of early appalachia...

 

[end game]

Policymakers have signaled they expect to cut interest rates sometime this year, but not until they are confident that inflation is conquered.

Well that plan won't be a definite after the latest CPI report dropped.

 

[end game]

Do you think ol Joey will forgive the debts made by working people or just the kids who went to a worthless school...?

Debt jubilee.....then anarchy

 

[end game]

you can be on the receiving end by investing.

Investing assumes rules, rules governed by order. Lack of order.........

 

[Ravekid]

The biggest issue is that the US powers that be have pushed a wasteful consumer culture on the people. So many people waste money on stupid trinket stuff and much of it likely just ends up in a landfill. I think younger generational folks have gotten better with wasteful spending on stuff because many just can’t afford a brand new set of holiday decor every year. I know there are a lot of re-use type social media groups as well.

The one area where young folks have a tendency to waste money is vehicles and pets. Too many young folks getting their first job and doing the historic practice (at least seen by me) of buying their first brand new car. Many just way over spend on cars. Pets have become a money pit as well. So many people are fulfilling something in their life with multiple pets. They can’t afford to care for so many pets though. Always seeing people begging for money so they can try to pay for thousands of dollars in cancer treatment for a pet. It seemed in past decades people we more able to put a pet to sleep than spend 10% plus of their annual salary in a possible futile attempt to save one pet.

Too many people wasting money based on emotion fulfillment and feelings instead of being logical about their spending. Millions need some Dave Ramsey advice when it comes to spending and debt.

 

[Hfcomms]

Always seeing people begging for money so they can try to pay for thousands of dollars in cancer treatment for a pet. It seemed in past decades people we more able to put a pet to sleep than spend 10% plus of their annual salary in a possible futile attempt to save one pet.

I can tell some stories here. A coworker I had several years ago spent over 15K on her lab for cancer treatments. The poor dog had one leg amputated already and the cancer was spreading and she couldn't bear to put the dog down so it basically became a money pit and suffered terribly.

And then shortly after that my 8 year old female German Shepherd was diagnosed with a hemangio sarcoma tumor and was peeing blood. I was going to the same vet that my coworker went to. She offered surgery as an option. I looked her right in the eye and asked about life expectancy if we did the surgery. The answer was three to six months but I had to ask her that.

I said 'the dog is full of cancer and you want to do surgery?' and she said that she was just offering options for me. In my mind a responsible vet would of counseled euthanasia as the dog was hopeless. Animals are becoming a money making operation just like human beings are in the medical realm.

I do not mind spending money on my dog when it makes sense. My Mal came down with an acute illness a few weeks back and right before that the annual vet check with vaccines. Between the annual check and the two trips to the clinic for IV's, radiographs and anti-nausea drugs the bills came to over $1300.

For something that is both treatable and reasonable I have no problem spending the money but we do have to keep in mind that they are animals and not human beings and no matter how much you love them you are still probably going to outlive them.

 

[20Gauge]

Well that plan won't be a definite after the latest CPI report dropped.

I am betting they will have a decent report just in time to lower rates before the election..... happens a lot

 

[33dInd]

I received a credit card offer from Sears master card
Balance transfer with 0% interest rate until June of 25
Then
Annual intrest rate of
31%
Now ain’t that a deal

 

[Hfcomms]

I received a credit card offer from Sears master card
Balance transfer with 0% interest rate until June of 25
Then
Annual intrest rate of
31%
Now ain’t that a deal

Any of those are good deals if you can pay it off by the due date and most of them don't. And then if you read the fine print on some of them if you don't pay off the transfer in full by the due date all the interest is retroactive. And then you have to be careful with the balance transfer fee's to as nearly all of them charge you 1% or 2% of the existing balance or more to do the transfer.

If someone is paying 20% on a card and they can do the transfer absorbing the transfer fee and paying the card off by the due date it can work good for them.

 

[end game]

I am betting they will have a decent report just in time to lower rates before the election..... happens a lot

Until the next quarter when the revisions come. All of the gubmint data is contrived gibberish.