Catenaa, Thursday, January 2, 2025-Credit card defaults in the US have reached their highest level since the Great Recession, raising alarm among economists and business leaders.1
According to data from BankRegData, lenders wrote off $46 billion in delinquent credit card balances between January and September 2024, a 50% increase from the same period last year. This marks the largest write-off in 14 years.
The surge in defaults is seen as a sign of the financial struggles of many Americans, especially lower-income households.
Median wage growth has failed to keep pace with inflation over decades, leaving many reliant on credit cards and other forms of expensive revolving credit to bridge the gap between stagnant wages and rising living costs. As of November, Capital One reported 6.1% of its loans as unrecoverable, up from 5.2% in 2023.
Moody’s Analytics, noted that high-income households are fine, but the bottom third of US consumers are tapped out. Their savings rate right now is zero.
The rising defaults coincide with the Federal Reserve’s signal that inflation will increase in 2025, dampening hopes for significant interest rate cuts. Over the past year, Americans carrying unpaid credit card balances paid $170 billion in interest, further straining household finances.
Economists warn of a potential ripple effect: reduced consumer spending could trigger layoffs and business cutbacks, creating a dangerous feedback loop that may destabilize the economy. As defaults climb, concerns about economic resilience grow increasingly urgent.
- forbes: https://www.forbes.com/sites/eriksherman/2024/12/31/us-credit-card-defaults-hit-post-great-recession-high/[↩]
