Once upon a time, in the land of the United States, Thanksgiving was approaching. Families were preparing to gather and celebrate, but there was a cloud of financial worry hanging over their heads. The Americans were facing record levels of debt, a burden that seemed to grow heavier with each passing day. Total household debt had risen by 1.3% in the three months leading up to September 2023, reaching over $17 trillion. This was a staggering amount, and compared to the same time last year, debt had increased by nearly $800 billion. It was as if the weight of the debt was crushing the spirits of the people, making it difficult for them to truly enjoy the holiday season.
Credit card debt was one of the main culprits, increasing by nearly 5% to over a trillion dollars. Car loans were not far behind, rising by $13 billion to $1.6 trillion. And let's not forget about student loans, which had resumed repayments in October and had risen by $30 billion to $1.6 trillion. The younger generations, millennials and Generation Z, were particularly affected, with delinquency rates on the rise.
But it wasn't just the debt that was causing concern. The US was also grappling with high inflation, elevated borrowing costs, and a slowdown in hiring. The real estate market was struggling with high prices and mortgage rates, leading to a decrease in new mortgages. It seemed like every aspect of the economy was under pressure, and the people felt it.
Despite these challenges, employers were still recruiting, albeit at a slower pace. There was a glimmer of hope amidst the darkness, but it was not enough to alleviate the worries of the people. They were also concerned about inflation, with expectations of prices rising by 4.5% over the next year and 3.2% over the next five to ten years. The fear of a future where everything would become more expensive loomed over them.
However, amidst all the financial struggles, there were some small victories. Consumers had noticed a decline in prices, particularly the cost of gas. It was a small respite in the midst of the storm, a momentary relief from the burden of debt and economic challenges.
As Thanksgiving approached, the mood was a mix of conflicting emotions. There were some improvements in personal finances, but the concerns about the economy's future overshadowed them. The Americans were facing increased debt and economic challenges during what should have been a joyous holiday season. But they were resilient, and they held on to hope that things would get better. They gathered around the Thanksgiving table, grateful for what they had, and determined to overcome the burden of debt that weighed them down.
Now, as Christmas approached, Bank of America released its annual primer on how to sound smart about the U.S. economy during holiday discussions. The primer included 10 questions related to the economy and provided factoids to impress relatives. It highlighted that the national debt is now at $33.8 trillion, with interest expenses on federal government-held debt reaching $950 billion over the last 12 months. The primer also discussed the resilience of the U.S. economy in the face of higher interest rates and the post-pandemic bout of inflation. It suggested avoiding explicitly political discussions but noted that the stock market historically underperforms during presidential years. The 2023 holiday season has been more festive than 2022, with stable unemployment, declining inflation, and growing corporate profits.
According to a recent LendingTree survey, Americans are grappling with financial instability, credit card debt, and economic anxiety. The survey reveals that credit card debt is a leading crisis, with growing concerns over inflation and a potential recession. Men have a heavier debt burden than women, attributed to higher incomes fostering greater expenditure. Lower and middle-income Americans face rising credit card balances and high interest rates, with credit card delinquency and charge-off rates surpassing 2019 levels. Gen Z relies on credit cards for daily necessities, while Baby Boomers and Gen X use them for all eligible purchases. The survey highlights the need for financial literacy and prudent budget management to navigate the economic challenges.
Inflation continues to squeeze American budgets, with the average household needing to pay $213 more a month in January compared to one year ago. This amounts to an extra $605 each month compared to two years ago and $1,019 more compared to three years ago. The burden of inflation is disproportionately borne by low-income Americans. Housing costs, including rent, rose 0.6% in January and are up 6.1% from the same time last year. Other price gains in January include gasoline (0.4%), groceries (0.4%), health insurance (1.4%), and auto insurance (20.6%). Credit card debt surged to a new record high at the end of December, reaching $1.13 trillion, an increase of $50 billion from the previous quarter. Overall, inflation continues to impact Americans' budgets, leading to increased credit card usage and a higher cost of living.
The average rent for a property with up to two bedrooms rose from US$1,424 at the end of 2020 to US$1,713 at the end of last year. Renters, especially low- and middle-income Americans, are struggling to keep up with the rising prices, exacerbating their financial stress. The combination of high inflation, increasing credit card debt, and rising rent costs is putting a significant strain on their ability to manage their finances. The situation is particularly dire for those repaying student loans, who are facing further deterioration in their financial health. It is a challenging time for many Americans as they try to navigate these financial hurdles and find stability amidst the economic uncertainty.
US consumers are struggling with soaring credit card debt and rising interest rates. The number of Americans seeking counseling for credit card debt has increased, particularly among young adults in their 20s. Total household debt in the US has risen by over 24% since 2019, with credit card balances growing the fastest. Delinquent credit card balances have more than doubled in the past two years. Interest rates on credit cards have also increased, with the average American spending $1,140 per year on credit card interest and fees alone. The use of buy now, pay later programs has also contributed to the credit card crisis. While the US economy has avoided a recession, there are concerns that the soft landing could be rougher than expected.
Many Americans are experiencing a personal recession due to high household debt and a drop in savings. Household debt rose to a record $17.8 trillion, including a record $1.14 trillion in credit card debt. The personal saving rate has decreased to 3.4% from 7.2% pre-pandemic. 5.3% of employed individuals are holding multiple jobs to make ends meet. The recent stock market turmoil could impact consumer spending. The experience of many Americans is as though they are already in a recession, regardless of the state of the broader economy.
A recent report by Affirm reveals that 59% of Americans falsely believe that the U.S. is currently in a recession. The report highlights that most respondents think a recession started roughly 15 months ago, in March of last year, and could last until July of 2025. This perception of a recession is driven by higher costs and the difficulty many Americans face in making ends meet. Despite the strong performance of the U.S. economy, with persistent inflation and high interest rates, there is a growing disconnect between the economy's performance and people's perception of their financial standing. Many Americans are struggling with high prices and have exhausted their savings, relying on credit cards to make ends meet. The widening wealth disparity is also contributing to this perception, with lower-income households falling further behind. The report also notes that a growing number of borrowers are falling behind on credit card payments, and more middle-income households anticipate struggling with debt payments in the coming months.
In addition to the financial challenges faced by Americans, there is another issue that adds to their burden: hotel junk fees. These fees, including junk, resort, destination, urban, and amenity fees, cost Americans nearly $3.4 billion annually. These hidden fees can catch travelers off guard and significantly increase the cost of their hotel stay. To combat these fees, the Biden administration has proposed the Junk Fee Prevention Act, which aims to increase transparency and protect consumers from hidden charges. Additionally, California has passed SB 478, a law that requires businesses to advertise prices inclusive of all mandatory charges.
To protect themselves from hotel junk fees, travelers can take several steps. First, they can search for hotels that do not charge resort fees or other hidden fees. Many online travel agencies allow users to filter search results based on fees, making it easier to find fee-free options. Second, travelers can negotiate with hotels to have fees removed or reduced. It's worth asking politely if the hotel is willing to waive any fees, especially if the traveler has a loyalty program membership or is celebrating a special occasion. Finally, if travelers encounter junk fees during their stay, they can complain to their local congresspersons or state attorney general's office. Bringing attention to the issue can help drive change and protect future travelers from these hidden charges.
In conclusion, Americans are facing high costs and hidden fees in hotels, adding to their financial burden. The rising debt, inflation, and credit card crisis have already put a strain on their finances, and hotel junk fees only exacerbate the situation. It is crucial for consumers to be aware of these fees, search for fee-free options, negotiate with hotels, and voice their concerns to lawmakers. By taking these steps, Americans can protect themselves and alleviate some of the financial pressures they face.