Ramsey Solutions personality Jed Warshaw breaks down the latest economic data that shows consumers’ credit card debt is rising amid a spending boom.
Experts are raising concerns as a new report indicates credit card Loan defaults have surged this year, raising warnings that the dam on Americans’ record-high consumer debt is about to burst.
Lenders forgave more than $46 billion in critically delinquent credit card debts during the first nine months of 2024, according to a Financial Times report citing data analyzed by BankRegData. This is a 50% increase from the first three quarters of 2023, and the highest since 2010.
A woman has credit cards. (iStock/iStock)
“High-income households are fine, but the bottom third of US consumers are tapped,” Mark Zandi, head of Moody’s Analytics, told the FT. “Their savings rate is zero right now.”
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Pointing to the findings, The Kobe Letter declared on the issue, “The credit card debt bubble is bursting.”
New York Federal Reserve Americans’ credit card debt hit another record high in September, climbing to $1.17 trillion during the third quarter and reaching the highest level on record in Fed data dating back to 2003, the report said last month.
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The report showed that total household debt also reached a new high of $17.94 trillion, along with balances on mortgages ($12.59 trillion), auto loans ($1.64 trillion) and student loan balances ($1.61 trillion).
Credit card loan defaults rose 50% in the first three quarters of 2024 compared to the same time frame last year, leading to a warning that “the credit card debt bubble is bursting.”
Discussing in a call after the report’s release, New York Fed researchers discussed the rising, sustained and “concerning” increase in loan balances across the board. auto loan and credit card defaults, and how stress and high default rates are concentrated among young borrowers.
“We have seen a significant increase in delinquency over the past few years, particularly for credit cards as well as auto loans,” said one researcher. “It’s something we’re pointing to as cause for concern – something to keep an eye on.”
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He pointed to an increase in payments consumers are making on credit cards and auto loans, partly due to for inflation And also because of high interest rates.
