Americans are defaulting on their credit cards at the highest level since in the wake of the 2008 financial crisis.
After building up cash reserves during the Covid-19 pandemic, high inflation has now all but depleted the savings of lower-income consumers.
Credit card lenders wrote off $46 billion in seriously delinquent loan balances in the first nine months of this year, according to BankRegData.
That is up 50 percent from the same period in 2023, and the highest level in 14 years, The Financial Times reported.
Write-offs are when a bank decides it is unlikely a borrower will make good on their debts, and are a clear sign of growing financial distress.
‘High-income households are fine, but the bottom third of US consumers are tapped out,’ Mark Zandi, head of Moody’s Analytics, told the outlet. ‘Their savings rate right now is zero.’
Household funds are becoming increasingly stretched after years of high inflation and heightened borrowing costs.
While the Federal Reserve began cutting benchmark borrowing costs from 21-year highs in September, the central bank signaled earlier this month the pace of cuts would be slower next year than expected.
Who built up a cash reserve from covid? Certainly not the people going bankrupt now.