Credit Card Delinquencies Hit Record High, Federal Reserve Warns of Further Deterioration Ahead

As the United States deals with the economic challenges posed by the growing disaster that is Bidenomics, a recent report from the Federal Reserve Bank of Philadelphia paints a troubling picture of the toll it is taking on American households.

The report reveals that credit card delinquency rates have reached an all-time high in the fourth quarter of last year, with nearly 3.5% of card balances being at least 30 days past due by the end of December.

This alarming trend is another example of the financial strain that many Americans are facing amid the rising costs of living caused by inflation.

The share of debts that are 60 and 90 days late has also increased, further highlighting the growing economic distress experienced by countless families across the nation.

According to the Philadelphia Fed, “Stress among cardholders was further underscored in payment behavior, as the share of accounts making minimum payments rose 34 basis points to a series high.”

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This concerning statistic suggests that more and more Americans are struggling to keep up with their credit card payments, often resorting to making only the minimum payment each month.

The report also reveals that nominal credit card balances have reached a new series high, with consumers increasingly relying on credit to make ends meet.

While inflation-adjusted credit card balances remain below fourth-quarter 2019 levels, the fact that one-quarter of active accounts now have a balance of over $2,000 for the first time is a worrying sign of the financial burden shouldered by many households.

Interestingly, the data also shows a dichotomy among consumers, with about one-third of cardholders paying their balance in full every month. However, this does not negate the harsh reality faced by the majority of Americans who are struggling to keep up with their credit card payments.

The Philadelphia Fed’s findings also suggest that further performance deterioration could be on the horizon, as credit scores at the 10th and 25th percentiles of cardholders have decreased to their lowest levels since the first quarter of 2020.

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In response to these troubling trends, issuers have taken steps to lower the credit limit for new accounts, with the median account opened in the fourth quarter having a limit of $3,000, down from the $3,368 high in the second quarter.

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