Credit: Envato Elements
A troubling trend that reveals the growing pressure on household finances.
Americans are facing tough financial times, with credit card defaults climbing to levels not seen since the 2008 financial crisis. This year alone, lenders have written off $46 billion in overdue credit card debt—a 50% increase from last year.
Lower-income households are feeling the squeeze the most. Many saw their savings boosted during the pandemic, but high inflation and rising costs have wiped those out. According to Mark Zandi of Moody’s Analytics, “The bottom third of U.S. consumers are tapped out. Their savings rate is now zero.”
Credit card balances soared during the pandemic as people spent more freely. Many lenders also approved loans for customers who wouldn’t have qualified in the past. But now, with higher interest rates making payments harder to manage, delinquencies are piling up.
Capital One, one of the biggest U.S. credit card companies, reported a rise in its default rate to 6.1% in November, up from 5.2% last year. Across the country, Americans now owe $37 billion in credit card debt that’s at least one month overdue.
The Federal Reserve’s slower-than-expected pace of interest rate cuts isn’t helping. The central bank recently signaled that relief might take longer, keeping pressure on already stretched budgets.
Experts warn that delinquencies—when payments are overdue by 30 days or more—are a clear red flag. Odysseas Papadimitriou of WalletHub says, “Delinquencies are pointing to more pain ahead.”
As financial strain grows, it’s more important than ever to stay on top of credit card bills and seek help if needed. By being proactive, consumers can better weather the storm while navigating these challenging times.
