Ramsey Solutions personality Jade Warshaw breaks down the latest economic data showing that consumer credit card debt is piling up amid a surge in spending.
Experts are sounding the alarm over a new report showing that credit card loan defaults rose this year, warning that the dam is poised to break record Americans’ consumer debt.
During the first nine months of 2024, lenders wrote off more than $46 billion in seriously delinquent credit card loans, according to a report from the Financial Times citing data analyzed by BankRegData. This is a 50% increase from the first three quarters of 2023, and the highest since 2010.
A woman holds credit cards. (iStock / iStock)
“High-income households are doing OK, but the bottom third of American consumers have been outdone,” Mark Zandi, head of Moody’s Analytics, told the FT. “Their savings rate is now zero.”
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Telling about the findings, Kobeissi Letter stated in X, “The credit card debt bubble is bursting.”
The New York Federal Reserve reported last month that Americans’ credit card debt hit another record in September, climbing to $1.17 trillion during the third quarter and marking the highest level recorded in Fed data since date from 2003.
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The report showed that total household debt also climbed to a new high of $17.94 trillion, along with balances on mortgages ($12.59 trillion), car 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 period last year, prompting a warning that the “credit card debt bubble is bursting.”
In a call discussing the report after its release, New York Fed researchers discussed rising debt balances across the board, the continued and “disturbing” rise in car loan and credit card delinquencies, and how stress and high delinquency rates are concentrated among younger borrowers.
“We have seen significantly higher flows in delinquency, especially for credit cards as well as car loans over the past few years,” said one researcher. “That’s something we’ve noted as a cause for concern — something to keep an eye on.”
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They pointed to the increase in payments consumers are making on credit cards and car loans, which is partly attributed to to inflation and also because of higher interest rates.
