“Credit card defaults in the U.S. have reached their highest level since the 2008 financial crisis, signaling a worsening financial situation for low-income consumers after years of high inflation.”, — write: epravda.com.ua
Credit card defaults in the U.S. have reached their highest level since the 2008 financial crisis, signaling a worsening financial situation for low-income consumers after years of high inflation. The Financial Times writes about it. In the first nine months of 2024, credit card lenders wrote off $46 billion in seriously delinquent loan balances, a 50% increase over the same period a year earlier and the highest rate in 14 years. Charge-offs, which occur when lenders decide it’s unlikely a borrower will repay their debts, are a closely watched indicator of significant credit problems.Advertisement: The sharp rise in defaults is a sign that consumers’ personal finances are becoming increasingly strained after years of high inflation, and because the Federal Reserve left the cost of borrowing high. Banks have yet to report their fourth-quarter figures, but early signs are that more consumers are falling well behind on their debts. Capital One, the third-largest credit card lender in the U.S. behind JPMorgan Chase and Citigroup, recently said its annual credit card charge-off rate, the percentage of total loans marked as bad, was 6.1% as of November, compared with from 5.2% a year ago. Credit card balances surged, increasing by a total of $270 billion in 2022 and 2023, and in mid-2023 topped $1 trillion for the first time, the total credit card debt owed by U.S. consumers.Advertisement: That spending, along with the bottlenecks caused by the coronavirus in supply chains led to a spike in inflation that prompted the Fed to raise borrowing costs starting in 2022. Higher balances and interest rates caused Americans who can’t pay their credit card bills in full to pay $170 billion in interest in the 12 months ending in September.