US credit card defaults soar to highest in 14 years

Experts are sounding the alarm over a new report indicating credit card loan defaults soared this year, warning the dam is about to break on Americans’ record-high consumer debt.

During the first nine months of 2024, lenders wrote off more than $46 billion in seriously delinquent credit card loans, according to a report from the Financial Times citing data analyzed by BankRegData. That’s an increase of 50% from the first three quarters of 2023, and the highest since 2010.

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“High-income households are fine, but the bottom third of US consumers are tapped out,” Mark Zandi, head of Moody’s Analytics, told FT. “Their savings rate right now is zero.”

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Pointing to the findings, The Kobeissi Letter declared on X, “The credit card debt bubble is popping.”

The New York Federal Reserve reported last month that Americans’ credit card debt hit another record high in September, climbing to $1.17 trillion during the third quarter and marking the highest level on record in Fed data dating back to 2003.

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The report showed total household debt also climbed to a new high of $17.94 trillion, along with balances on mortgages ($12.59 trillion), auto loans ($1.64 trillion) and student loan balances ($1.61 trillion).

Credit card loan defaults soared 50% in the first three quarters of 2024 compared to the same time frame last year, sparking a warning that “the credit card debt bubble is popping.”

In a call discussing the report following its release, New York Fed researchers discussed the growth in debt balances across the board, the persistent and “concerning” growth in auto loan and credit card delinquencies, and how stresses and high delinquency rates are concentrated among younger borrowers.

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

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They pointed to the rise in payments consumers are making on credit cards and auto loans, which is attributed partly to inflation and also because of higher interest rates.