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More Americans maxing out credit cards and failing to make payments than during pandemic


Daily Caller News Foundation

The share of Americans who failed to make a payment on their credit card debt rose above levels seen during the COVID-19 pandemic, led by those who have maxed out their credit lines, a report released Tuesday shows.

The percentage of people who were behind on making their credit card debt payment for more than 90 days jumped to 10.7% in the first quarter of 2024, higher than the pandemic high of 10% experienced in the first quarter of 2021, according to the report from the Federal Reserve Bank of New York. The rise in delinquencies is being led by those with utilization rates between 90% and 100% who are maxing out their credit cards amid widespread economic distress.

“In the first quarter of 2024, credit card and auto loan transition rates into serious delinquency continued to rise across all age groups,” Joelle Scally, regional economic principal at the New York Fed’s Household and Public Policy Research Division, said in the accompanying press release. “An increasing number of borrowers missed credit card payments, revealing worsening financial distress among some households.”

Credit card delinquencies rose rapidly at the onset of the COVID-19 pandemic, going from 8.4% in the fourth quarter of 2019 to 9.8% in the second quarter of 2020, according to the report. Delinquency rates then fell to 7.6% by the third quarter of 2022 as Americans grappled with a huge deluge of savings accumulated during the pandemic due to stimulus checks and lockdown measures.

Credit card balances as a whole declined in the first quarter by a collective $14 billion to $1.12 trillion, according to the report. Total debt held by Americans increased by $184 billion in the quarter to $17.69 trillion, led by a $190 billion increase in mortgage debt.

The cumulative amount that Americans had saved reached an all-time peak of nearly $6 trillion in April 2020, at the start of the COVID-19 pandemic, plummeting to just over $500 billion by June 2022, according to the Federal Reserve Bank of St. Louis. The balance rebounded to around $1 trillion in May 2023 but has since begun to decline again, currently sitting at just $671 billion as of March.

Many Americans have turned to debt and financing amid raging inflation that has pushed up costs across the board, with prices rising a total of 18.9% since Biden first took office in January 2021. In an effort to tame inflation, the Federal Reserve has placed its federal funds rate in a range of 5.25% and 5.50%, raising the cost of holding debt due to higher interest rates, which further hurts credit card holders.

The White House did not immediately respond to a request to comment from the Daily Caller News Foundation.

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Republished with permission from Daily Caller News Foundation

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