Ramsey Solutions’ Jade Warshaw shares the latest economic data showing that consumer credit card debt is piling up amid a spending boom.
Experts are sounding the alarm over a new report that indicates credit card Loan defaults have soared this year, warning that the dam is about to break under Americans’ record high 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 Financial Times report citing data analyzed by BankRegData. This is an increase of 50% compared to the first three quarters of 2023, and the highest since 2010.
Woman holding credit cards. (iStock / iStock)
“High-income households are fine, but the bottom third of US consumers are spent,” Mark Zandi, head of Moody’s Analytics, told the FT. “Their savings rate is zero right now.”
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Pointing to the revelations, The Kobeissi Letter reported on 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 2003.
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The report showed that total household debt also rose to a new record of $17.94 trillion, along with mortgage balances ($12.59 trillion), auto loans ($1.64 trillion) and student loans ($1.61 trillion) dollars).
Credit card loan defaults rose 50% in the first three quarters of 2024 compared to the same time frame last year, prompting warnings that the “credit card debt bubble is bursting.”
In a call discussing the report following its release, New York Fed researchers discussed debt growth across the board, steady and “troubling” growth car loan and credit card delinquencies, and how stress and high delinquency rates are concentrated among younger borrowers.
“We have seen significantly increased flows in delinquency, particularly for credit cards as well as auto loans over the past few years,” said one researcher. “That’s something we’ve been pointing to as a cause for concern — something to watch out for.”
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They pointed to an increase in payments made by consumers on credit cards and auto loans, which is partially attributed to inflation and because of higher interest rates.
