New data from the Federal Reserve Bank of St. Louis or FRED shows troubling signs that American credit card debt is on the rise. These warnings should be heeded as we progress through an era of rising interest rates and certain kinds of financial insecurity coupled with the affordable housing crisis that has only gotten worse since the pandemic.
Data shows that the number of large bank consumer credit card balances that are 30 or more days past due more than doubled from .8% in 2021 to around 1.7% this year.
Experts also studied the share of credit card accounts where account holders are making the minimum payment. That number went from about 8% in 2021 to 10.5% today — a nearly 30% increase.
These sorts of indicators illustrate how Americans are falling behind financially. Inability to pay down principal debt on credit lines is a harbinger for an increase in defaults in the near future.
Looking at these quarterly trends and other data from sources like FDIC insured commercial banks and savings institutions paints a bigger picture on the American credit card industry and the consumers’ declining financial state.
Research from the Center for Microeconomic Data shows total personal debt or household debt currently stands at around $17.6 trillion. Nearly $5 trillion of that is non-housing related debt. The Federal Reserve estimates that over $1.1 trillion dollars of that is credit card debt — and increase of over 13% compared to the same quarter of 2023.
Credit Card Debt Delinquency On The Rise
As for delinquency, the data shows a large drop from 2008 through 2015, with a slight recovery between 2015–2020, followed by a deep crash over the following two years. The pandemic and pandemic related fiscal policy had a palpable effect on these and other numbers reflected in FRED reports as inflation and by extension, the cost of living skyrocketed over the last few years.
By this time, the percentage of delinquent accounts has come back up to reach around 3%, according to the Federal Reserve Board.
All of this suggests that individuals and households have to do better in terms of monitoring their existing credit card debt and not allowing these debts to grow into unmanageable amounts.
Presumably, the credit card companies can also do more to support individual account holders. That involves making the true cost of borrowing money in the form of credit card debt so that people can better manage their finances in a changing macroeconomic landscape — and understand what’s possible in terms of options to paying off these debts.
The rise in credit card debt is a solid indicator of Americans’ financial picture. The spike in reliance on credit cards — the highest-interest form of borrowing money — is reflective of the increased cost in consumer goods that have outpaced wage growth.
With significant tax increases on the near-term horizon, the finances of the average American is about to get worse unless policymakers act and take meaningful action to curtail the relentless growth in inflation that has persisted since the early days of the pandemic.
