Credit Card Delinquencies Are Rising

Posted on November 01, 2017 by Laura Lam

While it’s easy to ignore when the stock market is at record highs and unemployment is reassuringly low, household debt is on the rise.  The Center for Microeconomic Data’s (CMD) latest Quarterly Report on Household Debt and Credit reveals that total household debt rose by $114 billion (0.9%) to $12.84 trillion in the second quarter of 2017.  This increase put overall household debt $164 billion above its peak in the third quarter of 2008, and 15.1% above its trough in the second quarter of 2013

Consumer debt, in many ways, should generate more concern – during the good times.  The persistence of burdensome debt after a recovery underscores systemic problems. Jobs still fly to other countries amid the rosy numbers. College still gets more expensive and student debt accelerates. In some ways, prosperity can even guarantee a worsening debt crisis when, for example, neighborhoods gentrify and resident populations of homeowners and small businesses cannot keep up.

CMD delinquentSuch dynamics may help explain the recent data from the CMD.  While the 0.9% increase in total household debt may seem modest, serious credit card delinquencies rose for the third straight quarter, a trend that has not been seen since 2009 – which was right after an economic collapse.

The CMD findings are in synch with a Harris poll conducted in April for the National Foundation for Credit Counseling (NFCC). The NFCC 2017 Consumer Financial Literacy Survey found significantly more consumers carrying credit card debt from month to month, while nearly 20% of these respondents are rolling over $2,500 or more. At the same time, in a complete reversal of a trend that began with the 2009 recovery, U.S. consumers are spending less than the previous years.  In addition to the toll this takes on consumers, it’s concerning on an economic perspective – as no one benefits when people owe more without spending more.

Source: Forbes, Federal Reserve Bank of New York