As 2025 begins, the United States is grappling with a significant financial crisis, marked by credit card defaults reaching their highest level since the Great Recession. In the first nine months of 2024, lenders wrote off $46 billion in seriously delinquent debt, a staggering 50% increase from the previous year. The total credit card debt has soared to $1.66 trillion, with the average American household carrying a credit card balance of $10,757. This alarming trend is underscored by an average credit card interest rate of 20.35%, further straining consumers' finances [uuid: 31f1f621].
Recent data indicates a shift in consumer borrowing trends. In November 2024, U.S. consumer debt fell by $7.5 billion, marking the largest drop in over a year. This decline was primarily driven by a $13.7 billion decrease in credit card balances, a significant change from the revised gain of $17.3 billion observed in October. Economists had anticipated a $10.5 billion increase, highlighting the unexpected nature of this downturn [uuid: 73bc74ca].
The economic landscape is complicated by rising living costs, which have surged 30.4% from 2019 to 2023. Since February 2020, U.S. prices have risen by 20.8%, contributing to the financial distress faced by many households. Approximately 3.5% of outstanding credit card debt was reported as delinquent, indicating that a significant portion of U.S. consumers, particularly those in the bottom third of income earners, are struggling to keep up with their payments. Over 10% of Americans are over 90 days behind on credit card payments, further illustrating the crisis [uuid: a234d082][uuid: 31f1f621].
The increase in defaults is reflected in the serious delinquency rates, which climbed from 5.78% in Q3 2023 to 7.1% in Q3 2024. By November 2024, defaults on credit card loans reached 6.1%, with 16% of U.S. adults reporting they have enough emergency savings. This financial strain is particularly pronounced among younger generations, with 31% of Generation Z adults living at home due to economic pressures [uuid: 31f1f621].
Retailers are also feeling the impact of high credit card swipe fees, which average around 2% per transaction. The National Retail Federation (NRF) has called on Congress to address these fees, arguing they contribute to inflation and hinder economic growth. In 2023, swipe fees reached an astonishing $172 billion, costing families over $1,100 annually [uuid: 351822f9].
In response to the financial challenges faced by consumers, Donald Trump has proposed a 10% cap on credit card interest rates, a measure that has gained traction among various political figures, including Bernie Sanders. This proposal comes as many Americans increasingly rely on credit cards to manage daily expenses, with younger generations showing a growing dependence on credit [uuid: a234d082].
Adding to the complexity of the financial landscape is the Durbin-Marshall credit card bill, introduced in 2023. A recent study by Oxford Economics Research indicates that this legislation could lead to a $227 billion loss in economic activity and the loss of 156,000 jobs over four years. The bill may particularly harm tourism-dependent areas, causing significant declines in consumer spending. Richard Hunt of the Electronic Payments Coalition has labeled the bill a 'jobs killer,' emphasizing that it could reduce credit card rewards, leading to an $80 billion drop in discretionary spending [uuid: c0cbbee5].
Travel and tourism contributed $1.2 trillion in direct spending in 2022, supporting nearly 15 million jobs, highlighting the potential widespread impact of the Durbin-Marshall bill. The study also notes that no other country has imposed similar regulations on credit card interchange fees, raising concerns about the bill's implications for the U.S. economy [uuid: c0cbbee5].
The combination of rising household debt, inflation, and increasing credit card defaults paints a troubling picture for American families. Consumer spending growth is expected to slow from 2.7% in 2024 to 2.2% in 2025, as analysts predict rising default rates and reduced consumer spending in the coming year. The Federal Reserve's predictions of only two quarter-point interest rate cuts in 2025 may not be enough to alleviate these pressures. As the economy remains a top concern for voters, with 52% citing it as their primary issue in the 2024 election, the implications of these financial trends are likely to resonate deeply in the coming year [uuid: 3b074813][uuid: 44385852][uuid: 9a1fe195].
In Michigan, middle-market companies, which employ nearly 30% of the southeast Michigan workforce, are seen as crucial for economic recovery. These companies have shown an 11% earnings growth in early 2024, despite the financial strain on consumers. Policymakers are urged to focus on lowering interest rates, enhancing workforce training, and supporting private-sector job growth to bolster the economy [uuid: 6bb30be0].