As the Federal Reserve has raised interest rates since March 2022, a recent survey revealed that 37% of credit cardholders have either maxed out or come close to maxing out their credit cards [4c61bf46]. Specifically, 20% of respondents reported maxing out a card, while 17% indicated they were near their limit. The survey, conducted by Bankrate, highlights the significant financial strain many Americans are experiencing, with 54% attributing their credit woes to inflation and high prices [4c61bf46].
The total U.S. credit card balances reached $1.14 trillion in Q2 2024, reflecting a 5.8% increase year-over-year [fe39bc38]. This surge in credit card debt is compounded by rising housing costs and essential expenses that disproportionately affect low-income earners [fe39bc38]. The average credit card utilization rate stood at 21.3% in August 2024, indicating that many consumers are relying heavily on credit to manage their finances [4c61bf46].
In addition to the rising debt levels, the survey found that 88% of respondents reported negative impacts on their personal finances due to credit card debt, with 41% experiencing a decline in their credit scores [4c61bf46]. Alarmingly, 31% of Americans admitted to missing at least one bill payment in 2024, further illustrating the financial distress many are facing [4c61bf46]. Among parents with children under 18, 45% reported having maxed out their credit cards [4c61bf46].
Visa Inc's fiscal Q2 2024 results showed a 10% increase in net revenue and an 8% growth in payments volume, yet the current state of consumer credit card debt remains concerning [757888b7]. The delinquency rate for credit cards has increased significantly, surpassing 1% for the first time since February 2020, indicating a potential contraction in the U.S. economy as higher interest rates pose risks to credit card issuers [927c74d1].
The Federal Reserve's interest rate policies have been criticized for exacerbating economic inequality, with credit card companies facing accusations of gouging consumers through high APR margins, costing consumers an additional $25 billion last year [fe39bc38]. Furthermore, 59% of those who maxed out their cards reported missing payments, highlighting the precarious situation many find themselves in [4c61bf46].
As the U.S. grapples with these economic challenges, the political implications are significant, particularly as lower-income households have seen their economic share decline since the late 1970s [fe39bc38]. The trajectory of consumer credit and its implications for economic inequality will continue to be a critical area of focus moving forward. Despite these challenges, there is a more optimistic outlook for the coming year regarding financial situations and credit access, as inflation expectations remained stable, with anticipated gasoline prices rising by only 3.4% over the next year [14120de1].