Americans are defaulting on their credit cards at the highest rate in 14 years, sending a warning signal that many family’s finances are in tatters. The Financial Times reports that through the first three quarters of 2024, banks have written off $45.7 billion, up 46% from the same period a year ago.
And while numbers aren’t yet available for the fourth quarter, a new survey from Lending Tree suggests they might be worse. That survey finds that 36% of Americans took on debt over the holiday season, and of those, 44% hadn’t planned to do so. On average, people charged $1,181, up from $1,028 last year.
That survey also detected rising levels of stress and regret, with 60% saying they are worried about their decisions and 42% saying they regret it. While there’s awareness about how high interest rates are, with 42% saying their highest rate is 20% or higher, about one in five estimate they’ll pay down those holiday purchases within five months. But 20% are only making minimum payments.
Credit cards are the most popular choice, at 65%, followed by store cards (24%), buy-now, pay-later options (21%), and personal loans (19%.)
While the strain is worse on those with lower incomes, recent data from PYMNTS Intelligence research show that 74.5% of consumers carry some debt, which is relatively stable across most income levels. But for those who describe themselves as living paycheck to paycheck, according to PYMNTS, more than 90% carry credit card debt with balances averaging just over $7,000 in debt, versus $5,800 for people who aren’t in such dire straits.
“Inflation is still a big deal in this country, and it’s having a huge impact on people’s finances, including their holiday spending,” says Matt Schulz, LendingTree’s chief credit analyst, in the report. “If you were to only buy the same things you bought last Christmas, you’d likely have to spend more this year thanks to inflation. For many Americans, that means you either have to cut back on gifts or take on more debt. While people make lots of sacrifices to deal with higher prices, many may not want to sacrifice at the holidays, so debts continue to rise.”
Mastercard SpendingPulse’s final tally shows retail sales rose 3.8% this holiday season, with online spending up 6.7%.
