As the U.S. grapples with rising credit card defaults and increasing household debt, the potential impact of proposed credit card mandates is coming under scrutiny. Richard Hunt, CEO of the Electronic Payments Coalition, warns that the Credit Card Competition Act could severely harm the economy. According to a study by Oxford Economics, the legislation could lead to a staggering $228 billion loss in economic activity and the elimination of 156,000 jobs across the country [uuid: 62a44310].
The economic landscape is already strained, with credit card defaults reaching their highest levels since the Great Recession. In the first nine months of 2024, lenders wrote off $46 billion in seriously delinquent debt, marking a 50% increase from the previous year. The total credit card debt has climbed to $1.66 trillion, with an average American household carrying a credit card balance of $10,757, compounded by an average interest rate of 20.35% [uuid: 31f1f621].
Hunt emphasizes the importance of rewards credit cards, which are utilized by 70% of Americans and play a crucial role in driving tourism and local economies. In 2022, airline credit card miles funded 15 million domestic trips, generating $23 billion in economic activity. The travel sector alone contributed $1.2 trillion in spending, with a broader economic footprint of $2.6 trillion [uuid: 62a44310].
The proposed legislation has faced opposition from consumer groups, unions, and small businesses, who argue that it could lead to a significant drop in discretionary spendingāestimated at $80 billionāif enacted [uuid: 62a44310]. This comes at a time when consumer debt has already seen a decline of $7.5 billion in November 2024, driven by a decrease in credit card balances [uuid: 73bc74ca].
Despite the financial challenges, wealthier consumers continue to support spending metrics in the U.S., with companies like Procter & Gamble Co. reporting strong sales. However, the overall economic outlook remains cautious, as rising living costs and inflation have surged 30.4% from 2019 to 2023, putting pressure on households [uuid: d0bcc179].
The serious delinquency rates for credit cards have climbed from 5.78% in Q3 2023 to 7.1% in Q3 2024, indicating that a significant portion of consumers, particularly those in lower income brackets, are struggling to keep up with payments [uuid: 31f1f621]. As the Federal Reserve considers interest rate cuts to alleviate some of these pressures, the implications of the Credit Card Competition Act could further complicate the economic recovery process [uuid: 3b074813].
In Michigan, middle-market companies are seen as vital for economic recovery, showing an 11% earnings growth in early 2024 despite consumer financial strain. Policymakers are urged to focus on lowering interest rates and enhancing workforce training to support these businesses [uuid: 6bb30be0].
As the economy remains a top concern for voters, with 52% citing it as their primary issue in the upcoming 2024 election, the potential consequences of credit card mandates will likely resonate deeply in discussions about economic policy and consumer protection [uuid: 9a1fe195].