(VitalNews.org) – In what seems like the most logical ending of the Biden administration, U.S. credit card defaults in 2024 have skyrocketed to levels not seen since the aftermath of the 2008 financial crisis.
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With $46 billion in delinquent loans written off in just the first nine months, it is clear America’s financial stability is under significant strain.
Low-income earners are feeling the pinch, with many left without savings and a safety net during these turbulent economic times.
Data reveals that credit card defaults have reached their highest level since 2010, driven by severe financial pressures from prolonged inflation and rising borrowing costs.
Lenders have written off 50% more in doubtful accounts than in 2023, signaling distress among consumers, especially those in the lower income brackets.
This troubling trend shows a nation grappling with economic challenges that disproportionately affect the vulnerable.
Economic factors compound this crisis. High-income households remain relatively unaffected, but those at the bottom are in dire straits.
“High-income households are fine, but the bottom third of U.S. consumers are tapped out. Their savings rate right now is zero,” says Mark Zandi, a chief economist at Moody’s.
Banks like Capital One are already feeling the impact, with a reported increase in their annualized credit card write-off rate from 5.2% to 6.1%.
More than 74.5% of consumers now carry some form of credit card debt, a staggering statistic that climbs over 90% for those living paycheck to paycheck.
The financial strain on these individuals is elucidated by their average outstanding balances, further highlighting the economic disparity.
“US credit card defaults jump as consumer’s finances buckle”
Yes the Fed is too tight 👇 https://t.co/4Sf1tYtn6g
— James E. Thorne (@DrJStrategy) December 30, 2024
“Consumer spending power has been diminished,” underscores analyst Odysseas Papadimitriou, illustrating the burden on the average American consumer, cited by Breitbart News.
The $5.113 trillion in total U.S. credit card debt as of October is a clear indication of a looming debt crisis.
Americans are not only struggling with growing balances, but many also frequently reach their credit limits, unable to keep up with mounting financial obligations.
Rejection rates for credit applications, including crucial areas like credit cards and mortgages, have spiked, primarily affecting those with lower credit scores and making access to necessities like housing and transportation more difficult.
Excessive spending under the Biden administration, combined with high consumer spending and supply chain shocks, has driven inflation to critical levels.
The Federal Reserve’s response, raising interest rates, inadvertently raised credit card rates and borrowing costs, burdening the American people with $170 billion in interest payments by September 2024.
Though many hope for relief through lower rates in 2025, these challenges underscore the urgent need for comprehensive solutions to tackle this growing financial crisis.
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