Credit Card Defaults Surge Amid Inflation Pressures

Credit card defaults in the U.S. have reached levels not seen since the 2008 financial crisis, with $46 billion in delinquent balances written off in the first nine months of 2024. This marks a 50% increase compared to the same period last year, according to BankRegData.

Total credit card debt in the U.S. surpassed $1 trillion in 2023, with $37 billion in balances currently overdue by at least 30 days. Rising inflation and high borrowing costs have left many households unable to manage their debt.

CapitalOne reported an annualized credit card write-off rate of 6.1% in November, up from 5.2% in 2023. The trend underscores the financial strain facing lower-income Americans, who have been disproportionately affected by inflation.

Mark Zandi of Moody’s Analytics noted that the bottom third of U.S. consumers have no savings, leaving them vulnerable to economic shocks. WalletHub’s Odysseas Papadimitriou said the delinquency data suggests worsening financial conditions for many households.

High borrowing costs have compounded the issue, with Americans paying $170 billion in credit card interest over the past 12 months. The Federal Reserve has signaled that interest rates are unlikely to drop significantly in the near future.

Preliminary fourth-quarter data from major banks indicate an increase in delinquent accounts, raising concerns about broader economic impacts.