Financial experts warn credit card holders about rising debts, because data shows that an increasing number of Americans makes only their minimal payments every month.
The Q3 2024 Insights Report of the Philadelphia Federal Reserve shows that 10.75 percent of the creditors only made their mandatory payments in the third quarter of 2024.
It also noted that more consumers fall behind with their monthly card payments, since the number of overdue payments of 30 days has risen by 10 percent to a dizzying 3.52 percent.
The increase in the number of overdue accounts has doubled since the low point in the pandemic age of 1.57 percent in the second quarter of 2021.
Brian Riley, director of credit at Javelin Strategy & Research, explained to Payment Journal: 'The economy is still in a weak form and credit card managers must be aware that there are subtle elements that cause risks.
'The current trend in which more and more consumers only pay the minimum amount is a predictive measure that illustrates that the household budgets are constantly under pressure.
'What is important here is that not all map segments show signs of stress, but that the most vulnerable segments-which with low Fico scores, lower incomes and less experience with credit-indicate a risk in the field in 2025.
“When you consider that the ongoing consumer debts are at an unprecedented high level, the problems of inflation continue to put pressure on household budgets, and emennin must keep a close eye on the vulnerable portfolio indicators.”
Financial experts warn credit card holders about rising debts, because data shows that an increasing number of Americans makes only their minimal payments every month
Concerns about the increasing credit debts also emerged in the DFAST stress tests of 2024, which are also performed by the Federal Reserve.
These tests' assess whether banks are sufficiently capitalized to absorb losses during stressful circumstances, while they meet the obligations towards creditors and counterparties and can continue to borrow to households and companies, “said the reserve website.
The results showed that the banks would have to deal with an expected total loss of credit of roughly $ 684 billion, of which $ 175 billion would come from consumer credit cards alone.
“Credit card publishers certainly generate higher income if consumers only pay their minimally due payments, but the income is short -lived when the depreciation goes to 6 to 7 percent,” said Riley.
“That is far above 3.5 percent who achieved emptents from the comfort zone two years ago.”
Worries about the increasing credit debts also emerged in the DFAST stress tests of 2024, which are also performed by the Federal Reserve
The results showed that banks would have to deal with an expected total loss of credit of roughly $ 684 billion, of which $ 175 billion would come from consumer credit cards alone.
According to Nerdwallet, it would cost, with an average credit card balance of $ 10,563, 22 years and $ 18,000 in interest only to pay the minimum.
It also noted that one in five Americans who currently has a continuous credit card debt only wants to make minimal payments with their cards.
'A lot remains unknown. We have seen in recent days how quickly things can change.
'Due to the higher prices, people will make more use of credit cards for necessities of life. You assume a higher interest rate and then you have more trouble making ends meet.
“If they only pay the minimum amount, you can quickly go to drowning,” explains Elizabeth Renter, senior economist at Personal Finance company Nerdwallet.
A survey by the New York Fed from December 2024 shows that the average observed chance of missing a minimal debt payment in the next three months was 14.2 percent.
