Got a credit card (or three)? Balances creeping up faster than your willpower at a dessert buffet? You're not alone—most Americans are in the same boat.
Credit card debt is hitting record highs (pun intended), and the numbers just keep climbing. But why is this happening, and how did we get here? Let’s dig in.
Here are Five Fast Facts on crushing credit card debt in America:
- 🤔 Terminology - Credit card payments that are a couple days late aren’t what we’re talking about. When an account is at least 30 days overdue it’s considered “delinquent.” Credit card companies may “write off” accounts at 90 or 120 days late if the borrower defaults (they can’t or won’t pay their balance).
- 👀 How We Got Here - After being cooped up in the pandemic for so long, people wanted to get out and spend in 2022! The whole inflation mess came next, so the Fed hiked interest rates big time to bring it back down. That made it harder for folks to pay off all that post-pandemic debt, especially lower income folks, and there’s more buyer’s remorse going around than that cough you picked up over the holidays.
- 😣 In Bad Shape - Most American households are in pretty bad shape now, financially speaking. Credit card defaults are the highest they’ve been since 2010 (after the 2008 housing crisis). Card lenders wrote off $46 billion in delinquent loans last year, which was 50% higher than 2023. We’d almost be happy about credit card companies getting shafted…except that normal folks get shafted first!
- 😱 Default City - Now Americans are defaulting on credit cards like it was a cool kids club! Together, we owe almost $1.2 trillion on our credit cards, with a whopping $37 billion of that being at least one month past due! The default rates are rising in 49 states. It’s a big club…
- 🤦 Help? Not So Much - The Fed did cut interest rates a couple times last fall, but they’ve backed away from their promise of more cuts this year. Now they’re looking at just two small cuts rather than the four big ones they talked about before, especially because inflation still remains above the 2% target. That’s a cruel tease if there ever was one, huh?
🔥Bottom line: It’s a tough situation when the month outlasts the money on a regular basis! We just have to do the best we can to make a buck where we can, save a buck where we can, and help each other out!
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