Inflation, high spending propels consumer debt up
Inflation, high spending propels consumer debt up
Consumers racked up more debt in January. The Federal Reserve reported that consumer credit overall was up at an annual rate of 3.7%. Revolving debt — that’s mostly on credit cards — was up more than 11%.
After slowing down early in the pandemic, Americans’ “dance with debt” is speeding up again.
More broadly, prices are still rising sharply — and so are borrowing costs. But in spite of it all, American consumers keep spending it up, according to Ted Rossman at Bankrate.com.
“We’re seeing record-high credit card balances and record-high interest rates,” Rossman said.
And those interest rates, topping 20% in many cases, are making it harder for households to pay off their credit-card balances in full every month.
Low and middle-income households are having the most trouble, said Warren Kornfeld at Moody’s Analytics. Especially renters — who haven’t been able to build up home-equity as prices have risen — and many of whom have run through the stimulus and unemployment checks they banked during the pandemic.
“They’ve completely spent down excess savings,” Kornfeld said. “And inflation’s taking a material bite out of their budgets. Many of them are resorting to their credit cards to fund that spending.”
Credit card delinquencies are still well-below pre-pandemic level. But they’re rising fast, according to Kornfeld.
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