Credit card defaults have surged to their highest level in 14 years, revealing growing financial strain on American consumers. During the first nine months of 2024, credit card lenders wrote off $46 billion in seriously delinquent loans - a 50% increase compared to the same period in 2023.
The sharp rise in defaults points to mounting pressure on household finances after years of high inflation and increasing borrowing costs. Capital One, one of America's largest credit card issuers, reported their credit card write-off rate climbed to 6.1%, up from 5.2% last year.
"High-income households are fine, but the bottom third of U.S. consumers are tapped out," noted Mark Zandi, head of Moody's Analytics. "Their savings rate right now is zero."
The defaults come as total U.S. credit card debt reached a record $1.17 trillion in the third quarter of 2024. Data shows the strain is particularly acute among younger borrowers and those living paycheck-to-paycheck.
For consumers struggling to pay bills, average credit card balances hover around $7,000, compared to $3,200 for financially stable cardholders. About 40% of financially strained consumers regularly reach their credit limits.
The New York Federal Reserve has flagged the persistent growth in credit card and auto loan delinquencies as concerning. Their researchers point to rising payment burdens driven by both inflation and higher interest rates as key factors straining household budgets.
With rejection rates increasing for new credit applications and signs that more consumers are falling behind on payments, experts warn these default trends could signal broader economic challenges ahead for American consumers.