US credit card spending rises to highest level since 2010

Stay informed about free updates

Just register to go The US economy myFT Digest — delivered directly to your inbox.

The cost of U.S. credit card loans has reached its highest level since the 2008 financial crisis, a sign that the financial health of low-income consumers is still collapse after years of high inflation.

Credit card lenders wrote off $46bn in delinquent balances in the first nine months of 2024, up 50 per cent from the same period last year and the highest level in 14 years, the follow industry data compiled by BankRegData. Foreclosures, which occur when lenders decide that a borrower is unlikely to pay back their debts, are a closely watched measure of severe credit stress.

“High-income households are OK, but the bottom third of US consumers are affordable,” said Mark Zandi, head of Moody’s Analytics. “Their savings rate is currently zero.”

The sharp rise in defaults is a sign of how consumer spending has been increasing over the years. high priceand since the Federal Reserve has left borrowing costs high.

Banks have yet to report their fourth quarter figures but early signs are that many customers are falling far behind on what they owe. Capital One, America’s third largest credit card lender, after JPMorgan Chase and Citigroup, recently said that as of November its annual credit card rate, which is a percentage of its outstanding loans as non-refundable, they reached 6.1 cent, up from 5.2 per cent last year.

“Consumer spending power is down,” said Odysseas Papadimitriou, head of consumer credit research firm WalletHub.

US consumers have come out of crisis-era recessions flush with cash and ready to spend. Credit card lenders were happy to help, signing up customers who may not have been financially qualified in the past, but looked like safe borrowers because their bank accounts were full of money.

Credit card debt rose, rising by a combined $270bn in 2022 and 2023, and pushing total US consumer credit card debt above $1tn for the first time in mid-2023.

That spending coupled with supply bottlenecks caused by the coronavirus led to a price explosion, which prompted the Fed to increase borrowing costs starting in 2022.

High rates and high interest rates left Americans unable to pay off their credit card debts in full paying $170bn in interest over the past 12 months in September.

That absorbed some of the excess cash in consumer accounts, especially low-income consumers, and as a result, many borrowers struggled to pay off credit card debt. see credit card purchases.

It is expected that the central bank of America will lower interest rates quickly in 2025 after this year’s rates were damaged last week, when officials only predicted. half a point of a rate cut next year, compared with a forecast of 1 percent three months ago.

In a sign of how much consumers are struggling, even after writing off nearly $60bn in consumer credit card debt last year, another $37bn remains on those consumer cards at least a month old.

Credit card delinquency rates, seen as a precursor to write-offs, peaked in July, according to data from Moody’s, but have fallen slightly and remain a percentage point higher than they were about a year before this epidemic.

“Criminals point to more pain to come,” WalletHub’s Papadimitriou said.

Donald Trump’s threat of wider tariffs, which could increase inflation and interest rates, will be “two things that are difficult for consumers in 2025”, he added.