The economy is strong, but millions of Americans are struggling to make minimum credit card payments. According to the Philadelphia Federal Reserve, the share of active credit card accounts making just the minimum payment reached a 12-year high of 10.75% from July through September 2024. As credit card balances rise, delinquency rates are also worsening.
Despite broader economic data showing resilience among consumers and strong spending, these specific trends paint a worrisome picture. Economists note that while upper-income households can offset struggles for lower-income groups, the latter face higher reliance on credit and reduced savings. Lower and middle-income household saving rates turned negative in early 2022 as people drew down emergency funds, but have since rebounded.
For average Americans, 73% struggle to cover basic expenses, with a third taking on debt to do so. Households with revolving credit card debt owe an average of $10,563, according to a NerdWallet survey. Wells Fargo economists highlight that carrying this debt is more costly than during lower-interest periods and puts some households at risk of defaulting.
Revolving card balances reached $645 billion from July through September 2024, up 52.5% since mid-2021’s decade low. Credit card delinquency rates for those 30+ days past due rose to 3.52%, double the pandemic-era rate of 1.57%. Experts advise taking more than the minimum payment, considering balance transfer cards with zero-interest terms, and working with credit counseling agencies for those with lower credit scores or significant debt.
Americans are not only spending more but also paying less, leading to higher balances and delinquency rates. With rising interest rates, managing credit card debt has become increasingly challenging. For those who can make extra payments, signing up for a balance transfer card could significantly reduce debt in the long run. For others, working with a reputable nonprofit credit counseling agency may provide the tools needed to manage their finances responsibly.
This growing delinquency trend signals a potential financial challenge for many Americans as they navigate rising interest rates and limited savings. Experts urge consumers to stay disciplined and proactive in managing their credit card debt to avoid long-term consequences.
Source: https://eu.usatoday.com/story/money/personalfinance/2025/01/26/economic-warning-behind-credit-cards-financial-stress/77887274007