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Americans Have Never Been So Far Behind on Their Credit Card Bills
By Adam Hardy MONEY RESEARCH COLLECTIVE
Analysis from the Federal Reserve Bank of Philadelphia finds that credit card balances, delinquencies and utilization rates have reached their highest levels on record.
A new report from the Federal Reserve Bank of Philadelphia provides a glimpse into how Americans are dealing with credit card debt — and the picture is pretty bleak.
The phrase “series high” appears again and again throughout the short analysis, underscoring the fact that credit card balances, delinquencies and utilization rates have reached the highest levels since the Philadelphia Fed began tracking this data in 2012.
“Credit card performance worsened to historical levels,” the report states, noting that the share of folks who fell behind at least 30 days on their credit card payments reached an all-time high between October and December 2023.
Overall, about 3.5% of card balances were past due 30 days or more. The share of people who were further behind on their credit card bills also climbed by the end of the year. Meanwhile, nearly 11% of cardholders were making only the minimum payment possible: another record high.
The researchers note that seasonal factors are at play. Toward the end of the year, which is the period measured by this report, credit card balances tend to spike and borrowers miss payments more than usual due to the holiday season (but the end of 2023 was particularly rough).
On the bright side, credit card balances when adjusting for inflation were slightly below pandemic levels.
Why people are struggling with credit card debt now
The Philadelphia Fed’s report is not an outlier. Several recent analyses have come to similar conclusions, finding that Americans are increasingly falling behind on their debts. The trend may even be accelerating in 2024.
While the Philadelphia Fed’s report looks at the last few months of 2023, data through February from the credit-scoring firm VantageScore shows that Americans are also struggling to make timely payments on auto loans, mortgages and personal loans.
For many folks, their credit scores are tanking because of it. A Money analysis of VantageScore data found that, over the past year, more than 1.2 million Americans became “subprime borrowers.” In other words, they fell into the lowest credit score category possible, with scores of 600 or below.
When people have a subprime credit score, it becomes exceedingly difficult to participate in the U.S. financial system and modern daily life as a whole. For example, subprime borrowers are often charged exorbitant annual percentage rates. Beyond loans, internet and phone plans, security deposits and even rent payments can increase in cost as a result of a low credit score. Employers are increasingly considering credit history in their hiring decisions, as well.
At the same time, VantageScore data shows that some Americans are doing better than ever and have joined the group of “superprime borrowers” with credit scores above 780. The chasm forming between them represents what one VantageScore executive called a “tale of two consumers.”
The dichotomy is evident in the Philadelphia Fed’s report, too. On one hand, a growing share of Americans are racking up record-levels of debt on their credit cards and can only manage to pay the bare minimum each month — if at all. On the other hand, about 1 in 3 credit cardholders are able to pay off their monthly balance in full.
What’s fueling the trend? Experts from both VantageScore and FICO, another credit scoring firm, say that high interest rates and lingering inflation are likely culprits.
While inflation is indeed moderating, prices on everyday goods and necessities are still far pricier than they were before the pandemic. To rein in soaring prices, the Federal Reserve hiked benchmark interest rates 11 times since March 2022. Many of those prices remain stubbornly high, however, meaning interest rates are likely to stay elevated for the moment, as well.
This puts everyday consumers in a sort of financial Catch-22: Almost everything is more expensive. So they have to rely more heavily on credit cards or other financing to make ends meet. But because of elevated interest rates, the cost of borrowing is through the roof, too.
That begs the question: Just how many more all-time highs can Americans stomach?
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Adam Hardy is Money's lead data journalist. He writes news and feature stories aimed at helping everyday people manage their finances. He joined Money full-time in 2021 but has covered personal finance and economic topics since 2018. Previously, he worked for Forbes Advisor, The Penny Hoarder and Creative Loafing. In addition to those outlets, Adam’s work has been featured in a variety of local, national and international publications, including the Asia Times, Business Insider, Las Vegas Review-Journal, Yahoo! Finance, Nasdaq and several others. Adam graduated with a bachelor’s degree from the University of South Florida, where he studied magazine journalism and sociology. As a first-generation college graduate from a low-income, single-parent household, Adam understands firsthand the financial barriers that plague low-income Americans. His reporting aims to illuminate these issues. Since joining Money, Adam has already written over 300 articles, including a cover story on financial surveillance, a profile of Director Rohit Chopra of the Consumer Financial Protection Bureau and an investigation into flexible spending accounts, which found that workers forfeit billions of dollars annually through the workplace plans. He has also led data analysis on some of Money’s marquee rankings, including Best Places to Live, Best Places to Travel and Best Hospitals. He regularly contributes data reporting for Best Colleges, Best Banks and other lists as well. Adam also holds a multimedia storytelling certificate from Poynter’s News University and a data journalism certificate from the Investigative Reporters and Editors (IRE) at the University of Missouri. In 2017, he received an English teaching certification from the University of Cambridge, which he utilized during his time in Seoul, South Korea. There, he taught students of all ages, from 5 to 65, and worked with North Korean refugees who were resettling in the area. Now, Adam lives in Saint Petersburg, Florida, with his pup Bambi. He is a card-carrying shuffleboard club member.