The dam is about to break as US credit card loan defaults soar," per NYP

Experts are raising alarms over a sharp rise in credit card loan defaults this year, cautioning that the strain of Americans’ record-high consumer debt could soon reach a breaking point.

During the first nine months of 2024, lenders wrote off over $46 billion in seriously delinquent credit card loans, according to data analyzed by BankRegData and reported by the Financial Times. This figure represents a 50% increase compared to the same period in 2023 and is the highest level of credit card loan write-offs since 2010.

“High-income households are fine, but the bottom third of U.S. consumers are tapped out,” said Mark Zandi, head of Moody’s Analytics, in an interview with the Financial Times. “Their savings rate right now is zero.”

The financial strain is underscored by data from the New York Federal Reserve, which reported last month that Americans’ credit card debt climbed to a record $1.17 trillion in the third quarter of 2024, the highest level recorded since the Fed began tracking the data in 2003. Total household debt also hit a new peak at $17.94 trillion, driven by increases in mortgage balances ($12.59 trillion), auto loans ($1.64 trillion), and student loans ($1.61 trillion).

Growing Concern Over Debt Delinquencies

In a discussion following the release of the Fed report, researchers highlighted troubling trends in delinquencies across debt types. Auto loan and credit card delinquency rates have shown persistent growth, with younger borrowers disproportionately affected.

“We’ve seen notably elevated flows into delinquency, particularly for credit cards as well as auto loans during the past few years,” one New York Fed researcher noted. “This is something we have been pointing to as a reason for concern — something to keep an eye on.”

The rising default rates highlight the growing financial stress among American households, particularly those with limited savings or income. As the cost of living remains high and debt balances continue to grow, experts warn that the situation may worsen unless economic conditions improve or significant policy interventions occur.