Total U.S. credit card balances have surged to $1.14 trillion, reflecting a 5.8% increase year-over-year as of August 27, 2024, according to Oklahoma Voice [fe39bc38]. This alarming rise in credit card debt is occurring alongside soaring housing costs and other essential expenses that disproportionately affect low-income earners [fe39bc38]. The average credit card interest rate reached 22.76% in May 2024, further exacerbating the financial strain on consumers [fe39bc38].
Visa Inc's fiscal Q2 2024 results showed a 10% increase in net revenue and an 8% growth in payments volume [757888b7]. However, the current state of consumer credit card debt remains concerning, with Americans' total credit card balance hitting $1.129 trillion in Q4 2023, marking the third consecutive quarter above the $1 trillion threshold [757888b7][f3873656]. This data aligns with rising delinquency rates and diverging consumer credit trends in the U.S. [757888b7][f3873656][ca265ea2][282e3398][dfd7f56f].
Recent reports indicate that delinquencies are rising across all credit tiers and products, with February 2024 seeing delinquency rates for auto loans, credit card debt, mortgages, and personal loans all increase [dfd7f56f]. The delinquency rate surpassed 1% for the first time since February 2020, highlighting the growing economic stress on consumers [dfd7f56f].
Moreover, consumers' total outstanding credit rose by $14.1 billion in February, reaching $5.05 trillion, with revolving credit accounting for $11.3 billion of this increase [73e0149c]. While the rise in borrowing indicates continued consumer spending, it is lower than economists' forecasts, suggesting a potential economic slowdown [73e0149c].
The increase in delinquencies points to a troubling trend, especially among lower-income households, who are struggling to keep up with loan payments as inflation continues to squeeze their budgets [282e3398]. 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].
In Q1 2024, the credit performance of major U.S. credit card issuers weakened, with the weighted average net charge-off rate rising to 4.2%, surpassing pre-pandemic levels [927c74d1]. The delinquency rate for credit cards increased significantly, indicating a potential contraction in the U.S. economy as higher interest rates pose risks to credit card issuers [927c74d1].
According to the New York Fed, overall household debt in the U.S. rose by $184 billion to $17.69 trillion in Q1 2024, with credit card balances decreasing by $14 billion but remaining 13% above the year-ago level [0765f39c]. Delinquency rates for credit cards and auto loans have continued to rise, reflecting deteriorating household financial health [0765f39c].
The current economic landscape suggests that while superprime consumers are still borrowing, those in lower-income brackets are facing greater financial stress, leading to higher default rates on loans [282e3398]. Experts emphasize the disproportionate impact of rising credit card debt on low-income individuals, linking it to unregulated financial technology products that have proliferated in recent years, such as 'buy now, pay later' schemes [fe39bc38].
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.