Banks are writing off credit card debt at a record high, according to quarterly FDIC data compiled by BankRegData. The total amount charged off through the first three quarters of 2024 reached $45.7 billion, up 46% from the same period last year.
This surge represents a potential red flag for the economy, as consumers have struggled to keep up with inflation and higher borrowing costs in recent years. Credit card balances grew by $24 billion during the third quarter, now totaling $1.17 trillion, an increase of 8.1% from a year ago.
Despite improving delinquency rates on individual card balances, the overall rate across all consumer debt ticked up to 3.5%, from 3.2%. Experts say this indicates stress for many households, even as some moderation in delinquency trends is seen this quarter.
The massive buying spree that occurred during the pandemic and afterward is starting to catch up with consumers now. Inflation has cooled sharply, but prices remain elevated from pre-pandemic levels. The Federal Reserve’s aggressive interest rate hikes are also still affecting credit card rates.
As a result, consumers may not see much relief soon. President-elect Donald Trump’s plans to impose tariffs and crack down on immigration are expected to lead to higher prices for consumers, keeping the burden of high interest rates heavy on credit card users.
Source: https://fortune.com/2024/12/30/credit-card-debt-writeoffs-consumer-spending-inflation-fed-rates