Credit Card Delinquencies on the Rise, Surpassing Pre-pandemic Levels
Credit card delinquencies have surged in the third quarter of last year, reaching levels beyond those seen before the pandemic struck. This development is concerning but not entirely unexpected, given the robust consumer spending witnessed recently, much of which has been financed by credit cards.
According to data from the Philadelphia Fed, the number of individuals unable to make credit card payments within 30, 60, or 90 days has risen sharply. In fact, the current figures are nearing record levels since data tracking began in 2012. The rise in delinquencies, combined with the soaring levels of credit card debt, has consumer experts sounding the alarm.
The outstanding consumer credit card debt in the United States has reached a staggering $5 trillion, a record-breaking figure. The surge in debt can be attributed, in large part, to the considerable increase in consumer spending. For instance, in November alone, analysts initially predicted approximately $9 billion in credit card spending. The actual figure, however, surpassed expectations by more than two and a half times, totaling approximately $24 billion.
In addition to conventional credit card debt, concerns have also arisen surrounding a relatively new payment system known as 'buy now, pay later.' This payment model allows shoppers to make purchases online and pay for them in installments. However, the usage and impact of this system are not as closely tracked or regulated as traditional credit cards. As a result, the true extent of debt incurred through this method remains largely unknown.
The rise in credit card delinquencies and mounting consumer debt is raising serious concerns among experts. The lack of visibility into the specific extent of Americans' debt poses additional worries, particularly since the current figures do not capture the full extent of the problem.
These developments serve as a reminder for individuals to live within their means and avoid excessive debt. Despite the prevailing high inflation, there has been a notable sense of optimism among consumers, prompting increased spending. However, this increased spending is largely being funded through credit cards, exacerbating the already grave debt situation.
The growing levels of credit card delinquencies and debt underscore the need for individuals to adopt prudent financial practices. By limiting reliance on credit cards and carefully monitoring their financial obligations, individuals can mitigate the risks associated with mounting debt. It is a critical time for Americans to exercise financial responsibility, as the consequences of unchecked debt can have long-lasting implications for their financial well-being.
