More Americans are falling behind on credit card bills
Credit card delinquencies rose in the first three months of the year. According to the Federal Reserve Bank of New York, almost 1 in 5 card users is "maxed out," using at least 90% of their credit limit. Justin Sullivan/Getty Images hide caption
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Justin Sullivan/Getty Images
Credit card delinquencies rose in the first three months of the year. According to the Federal Reserve Bank of New York, almost 1 in 5 card users is "maxed out," using at least 90% of their credit limit.
Justin Sullivan/Getty Images
More Americans are falling behind on their credit card bills.
About 8.9% of credit card balances fell into delinquency over the last year, according to the Federal Reserve Bank of New York — a sign that a growing number of borrowers are feeling the strain of rising prices and high interest rates.
"Everything is more expensive. Debt is more expensive. Rent is more expensive. Food, gas, everything," says Charlie Wise, senior vice president at TransUnion, the credit reporting firm. "Even with relatively healthy wage gains we've seen over last several years, many consumers just aren't keeping up with the price pressures."
Maxed-out borrowers are a big concern
The New York Fed's report shows the pain is not evenly spread. While many households are on solid financial footing, almost 1 in 5 cardholders is "maxed out," using at least 90% of their credit card limit. That's worrisome, the report says, because maxed-out borrowers are much more likely to fall behind on their bills.
People under 30 and those who live in low-income neighborhoods were particularly likely to be maxed out, according to the report. Among Generation Z borrowers, about 1 in 6 was close to exhausting their credit, compared with 4.8% of baby boomers.
Trapped in an expensive debt cycle
Overall credit card balances totaled $1.115 trillion in the first quarter of the year, $129 billion more than last year. For card users who pay their balance in full every month, that's not a problem. But according to Bankrate, roughly 44% of borrowers carry credit card debt over from month to month.
"The credit card market is really one of these proverbial tale of two cities," says Ted Rossman, senior industry analyst at Bankrate. "You have roughly half of cardholders paying in full and getting great benefits like rewards and buyer protections. And then you have the other half, more or less, who can easily become trapped in an expensive debt cycle."
Credit card debt is very costly, with the average interest rate topping 20%. Rossman says borrowers who make only the minimum monthly payment can take nearly two decades to pay down their debt. On an average balance of $6,360, the interest alone would total $9,500.
"Time is not your friend if you're a consumer who's struggling with debt," says Mike Croxson, CEO of the National Foundation for Credit Counseling. "Odds are as you go through paying minimums, missing minimum payments and other things, those rates are going to continue to increase."
Credit card delinquency rates are rising
Early in the COVID-19 pandemic, when spending opportunities were limited and the federal government was sending out relief payments, many people paid down their debts, and credit card delinquencies fell to historical lows.
That trend has now reversed itself. Credit card delinquencies have returned to pre-pandemic levels, despite rising wages and a low unemployment rate.
Rising rates of delinquency when both the labor market and the economy are strong are raising concerns at the New York Fed. It's a worrisome trend it will keep an eye on for months to come.
FAQs
A recent survey by the Federal Reserve Bank of New York found that around 9.1% of credit card balances turned delinquent over the past year — the highest rate in more than a decade.
Are Americans struggling with credit card debt? ›
Americans are racking up credit card debt as they struggle to keep up with the cost of living, and experts say those who earn the least are the hardest hit. Total credit card balances rose 5.8% from a year ago, to $1.14 trillion, according to a recent New York Fed report.
Are Americans behind on bills? ›
Watching those credit-card bills
Around 9.1% of credit-card balances turned delinquent over the past year, the highest rate in over a decade, according to an August report from the Federal Reserve Bank of New York.
Why do so many Americans get into credit card debt? ›
Many people lean into credit cards for emergency expenses not because they want to, but because they have to. When you need extra cash for an emergency and don't have it, credit cards and personal loans are the fastest way to cover unexpected costs.
How many Americans are late on credit card payments? ›
Just 3.25% of Americans' total outstanding credit card balances are currently at least 30 days delinquent.
What is the average debt of an American? ›
The average debt an American owes is $104,215 across mortgage loans, home equity lines of credit, auto loans, credit card debt, student loan debt, and other debts like personal loans. Data from Experian breaks down the average debt a consumer holds based on type, age, credit score, and state.
How many Americans live paycheck to paycheck? ›
Recent MarketWatch Guides survey results indicate that 66.2% of Americans feel like they're living paycheck to paycheck. Respondents struggling to make ends meet span demographics, including genders, generations and incomes.
What is a normal amount of credit card debt? ›
On an individual level, the overall average balance is around $6,501, per Experian's data. Other generations' credit card debt falls closer to that average or below. Here's the average amount of credit card debt Americans hold by age as of the third quarter of 2023, according to Experian.
How many Americans are drowning in credit card debt? ›
So, roughly 103 million Americans have credit card debt! A Ramsey Solutions research study also found that almost 40% of Americans rely on credit cards to cover their basic monthly needs, and 1 in 4 Americans have maxed out a credit card in the last 90 days.
Are more people defaulting on credit cards? ›
The share of credit card debt that's severely delinquent, defined as being more than 90 days overdue, rose to 10.7% during the first quarter of 2024, according to the Federal Reserve Bank of New York.
The Federal Government Has Borrowed Trillions, But Who Owns All that Debt? At the end of 2023, the nation's gross debt had reached nearly $34 trillion. Of that amount, about $27 trillion, or 79 percent, was debt held by the public — representing cash borrowed from domestic and foreign investors.
Are Americans struggling in 2024? ›
Inflation is cooling, yet many Americans say they're living paycheck to paycheck. Even as inflation continues to cool into the second half of 2024, many Americans say they're still struggling to make ends meet.
How to pay off credit card debt when you have no money? ›
These options could help you tackle what you owe without an additional loan:
- Transfer your balance to a new card with a promotional rate.
- Try to negotiate with your creditors.
- Enroll in a debt management plan.
- Take advantage of credit card hardship programs.
- Use a debt settlement program.
Credit card balances, which are now at $1.14 trillion outstanding, increased by $27 billion during the second quarter and are 5.8% above the level a year ago. Auto loan balances saw a $10 billion increase, and now stand at $1.63 trillion.
What causes the most debt in America? ›
One of the main culprits is consistently overspending. When the federal government spends more than its budget, it creates a deficit. In the fiscal year of 2023, it spent about $381 billion more than it collected in revenues. To pay that deficit, the government borrows money.
How many people are delinquent on credit card payments? ›
Over the last year, roughly 9.1% of credit card balances transitioned into delinquency, the New York Fed reported.
What percentage of Americans pay off their credit cards monthly? ›
One-half of American credit cardholders carry a credit card balance from month to month. That's 50 percent of cardholders, compared to 44 percent in January 2024 and 60 percent in March 2020.
How much do Americans owe on credit cards? ›
Based on data from the Federal Reserve Bank of New York and the U.S. Census Bureau (based on 2024 and 2023 data respectively), it can be calculated that each American household carries an average of around $8,674 in credit card debt in a year.
What percentage of Americans have credit card debt in 2024? ›
50% of credit cardholders say they carry a balance from month to month, according to Bankrate's Credit Card Debt Survey. 36% of U.S. adults have more credit card debt than emergency savings, according to Bankrate's 2024 Emergency Savings Report.
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