Credit Card Defaults Are At Highest Levels Since 2010

Credit card debt in the United States has surged to its highest level since 2010, causing experts to forecast more financial pain ahead.

Industry data collected by BankRegData showed that factors like inflation, dwindling pandemic savings, and elevated borrowing costs due to the Federal Reserve's interest rate that sits at 4.25-4.50% have put a strain on consumer finances.

"High-income households are fine, but the bottom third of U.S. consumers are tapped out," Mark Zandi, the head of Moody's Analytics told the Financial Times. "Their savings rate right now is zero."

Lenders wrote off $46 billion in seriously delinquent loans during the first nine months of 2024, a 50% increase from the same period in 2023, showed findings by BankRegData.

Capital One reported its annualized write-off rate for credit card debt hit 6.1% in November, up from 5.2% in 2023.

The country's total credit card debt surpassed $1 trillion in mid-2023, fueled by post-pandemic spending and rising balances, with $37 billion overdue.

The Federal Reserve's interest rate hikes added to the problem, leading to $170 billion in interest payments over the past year.

Last year, the jump in Americans' credit card debt and delinquent accounts were led by millennials, according to findings by the Federal Reserve Bank of New York.

Earlier this year, Visa and Mastercard reached a landmark settlement to lower credit card fees until 2030, with a savings of $30 billion.