Defaults on U.S. credit card loans have surged to their highest level since 2008.
During the first nine months of 2024, credit card lenders wrote off $46 billion in seriously delinquent loan balances, those loans that they deem uncollectable. Compared to the same period just last year, this represents a monumental 50% jump, reaching the highest level since the great global financial crisis of 2008-2009.
Mark Zandi, the head of Moody’s Analytics, says that the bottom third of U.S. households face the most financial pressure. American consumers have been overwhelmed with historically high inflation and elevated interest rates. At the peak, inflation hit 9.1% in the summer of 2022. While it has subsided substantially, it remains stubbornly higher than the Fed would like.
Following the pandemic, many Americans enjoyed modest savings, driven in part by stimulus checks dolled out by the Federal government. The influx of cash meant credit card lenders were more willing to sign up new customers who would have previously not qualified. Credit card balances subsequently soared, pushing the country’s total credit card debt over $1 trillion for the first time ever in mid-2023.
In November, The Dallas Express reported that U.S. household debt reached a record high of $17.94 trillion in Q3 2024, up 0.8% from the previous quarter. The quarter also marked the tenth straight rise in homeowners borrowing equity in their homes, with home equity lines of credit jumping to $387 billion.
A recent study from personal finance app Piere found that credit card use among millennials has grown significantly, hitting 88% of the demographic’s Black Friday spending in 2024. This represents a nine-percentage-point increase since 2023 and a 16-percentage-point jump since 2022.
Looking back at the twelve months ending in September 2024, Americans have collectively paid $170 billion in credit card interest alone. Roughly $37 billion in outstanding debt that is at least one month overdue currently remains on U.S. credit cards.
Despite hopes for more aggressive lowering in 2025, the Fed is increasingly pointing to a slower interest rate unwinding in the new year.