Americans are having more trouble paying their bills these days. Consumer debt experts say this is a red flag that could foreshadow a more widespread economic impact. New survey results from the National Foundation for Credit Counseling (NFCC) find that 25% of adults aren’t paying their bills on time, and 8% have unpaid debts that have gone into collections — both increases of 3 percentage points from last year.
Matt Schulz, senior industry analyst at CreditCards.com, said he wasn’t surprised that people are struggling to pay their bills. “There’s only so much credit card debt Americans can take on without serious problems and nobody has quite known what that tipping point is,” he stated. “But it’s pretty clear that we’re not all that far from it.”
The NFCC found that women aged 18 to 34 had the greatest increase in late payments and nonpayment, with nearly 40% saying they don’t make payments on time. Although women outpace their male counterparts in earning college degrees, this could set them up with higher debt at the onset of adulthood, according to Bruce McClary, spokesman for the foundation. He adds that this could have a cumulative effect, especially if their early careers are marked by underemployment.
The rise in borrowers who have bills in collections is a particularly alarming sign, said McClary. “It is troubling because that’s a very serious financial situation that could have a cascading impact on other areas of personal finance,” he said.
McClary said the Federal Reserve’s plan to raise interest rates should give borrowers a sense of urgency about getting their debts paid down. “We can expect interest rates on credits card to go up more than once in the coming year,” he said. “The cost of borrowing is getting higher.”