A new report from the Philadelphia Federal Reserve highlights a worrying trend in the U.S. consumer economy as financial stress mounts. With record-high inflation and rising interest rates, more Americans are struggling to pay off their credit card debt, leading to higher revolving balances and delinquencies. The Fed’s data shows that 10.75% of credit card holders are making only minimum payments in the third quarter of 2024—a 58% increase since 2021. Total revolving card balances rose by over 50%, reaching $645 billion in 2024 compared to $914 billion in 2021. Delinquencies, or balances more than 30 days overdue, also surged to 3.52%.
This growing financial burden is a “nasty combination” of rising costs and high interest rates, forcing many households to rely on credit cards despite their struggles. Even those who spent down excess savings during the COVID-19 pandemic are finding it increasingly difficult to manage debt. Credit card debt remains at its highest level since 2012, with nearly half of borrowers carrying balances.
While debt levels have increased significantly, they are still not as high as they were during the Great Recession. However, the psychological toll on consumers is daunting, as they face mounting bills while income growth has stagnated. With inflation at 4.5% and interest rates averaging around 20%, paying off debt becomes an overwhelming challenge for many.
A recent Bankrate report found that 48% of credit card holders carry a balance, with 57% having owed it for over a year. NerdWallet’s findings reveal that a significant portion of these borrowers cite paying for necessities like food and housing as their primary reason for carrying debt. Despite efforts to combat inflation, the long-term effects will continue to impact millions of Americans striving to rebuild their financial health.
Source: https://fortune.com/2025/01/23/credit-card-defaults-debt-levels-increasing