Defaults on US credit card loans have hit the highest level since the wake of the 2008 financial crisis

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K shaped economy in full effect and we’re not even officially in the recession yet.

Defaults on US credit card loans have surged to their highest levels since the 2008 financial crisis. This alarming trend is a clear indicator of the financial instability many Americans are currently facing. The rise in defaults is driven by a combination of high inflation, rising interest rates, and economic uncertainty.

In 2024, the total US credit card debt reached a staggering $1.17 trillion, marking a significant increase from previous years. This surge in debt has been accompanied by a worrying rise in delinquency rates.

Credit card lenders wrote off $46bn in seriously delinquent loan balances in the first nine months of 2024, up 50% from the same period in the year prior and the highest level in 14 years, according to industry data collated by BankRegData. Write-offs, which occur when lenders decide it is unlikely a borrower will make good on their debts, are a closely watched measure of significant loan distress.

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The average interest rate on credit cards has also climbed to nearly 22%, the highest level recorded by the Federal Reserve in nearly three decades. This high-interest environment makes it even more challenging for consumers to manage their debt, leading to a vicious cycle of increasing balances and rising defaults.

Sources:

https://www.ft.com/content/c755a34d-eb97-40d1-b780-ae2e2f0e7ad9

https://www.lendingtree.com/credit-cards/study/credit-card-debt-statistics/

https://fred.stlouisfed.org/series/DRCCLACBS






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