While the US economy is broadly healthy, pockets of Americans have run through their savings and run up their credit card balances after battling inflation for more than two years. Experts worry that members of these groups—mostly lower- and middle-income Americans, who tend to be renters—are falling behind on their debts and could face further deterioration of their financial health in the year ahead, particularly those who have recently resumed paying off student loans. Some key stats, per the AP:
- Americans held more than $1.05 trillion on their credit cards in the third quarter of 2023, a record, and a figure certain to grow once the fourth-quarter data is released by FDIC next month.
- A report from the credit rating company Moody's showed that credit card delinquency rates and charge-off rates, or the percent of loans that a bank believes will never be repaid, are now well above their 2019 levels and are expected to keep climbing.
- These worrisome metrics coincide with the average interest rate on a bank credit card of roughly 21.5%, the highest it's been since the Federal Reserve started tracking the data in 1994.
"Overall, the consumer is credit healthy, said Silvio Tavares, president and CEO of VantageScore, one of the country's two major credit scoring systems. However, the reality is that there are starting to be some significant signs of stress. Most analyses of Americans' financial health tend to tell a tale of two consumers. On one side are the roughly two-thirds of Americans who own their homes and those who've invested in the stock market and done substantially well. But for the rest of America, those who have not benefited from the housing and stock markets, things are looking rough. "They've been hit very hard by inflation," said Warren Kornfeld of Moody's. Read the full story.
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