US Consumer Debt growing

Consumer debt hit a fresh record at the end of 2022 while delinquency rates rose for several types of loans, the New York Federal Reserve reported Thursday.

Debt across all categories totaled $16.9 trillion, up about more than $1.3 trillion from a year ago as balances rose across all major categories.

Despite a decline in originations, mortgage balances increased to $11.9 trillion, up about $250 billion from the third quarter and about $1 trillion from a year ago. ...

Mortgage loans considered in "serious delinquency" of 90 days or more rose to a rate of 0.57%, still low but nearly double where they were from the year prior. Auto loan debt delinquencies rose 0.6 percentage point to 2.2% while credit card debt jumped 0.8 percentage point to 4%.

"Credit card balances grew robustly in the fourth quarter, while mortgage and auto loan balances grew at a more moderate pace, reflecting activity consistent with pre-pandemic levels," said Wilbert van der Klaauw, economic research advisor at the New York Fed.

"Although historically low unemployment has kept consumers' financial footing generally strong, stubbornly high prices and climbing interest rates may be testing some borrowers' ability to repay their debts," he added.
...

Click to expand...

Credit Card Nightmares: How Everyday Americans Stay Broke!​

Forever in debt: Why U.S. loans are getting longer​

Voodoo said:

The economy and money supply can NOT expand without an expansion of Debt at the same time. It's how a debt based system "works".

Click to expand...

...
As of July, 61% of adults still said they are living paycheck to paycheck, according to a new LendingClub report, slightly more than last year's 59%.
...
Now, 78% of consumers earning less than $50,000 a year and 65% of those earning between $50,000 and $100,000 were living paycheck to paycheck in July, both up from a year ago, LendingClub found. Of those earning $100,000 or more, only 44% reported living paycheck to paycheck.

Some 70% of Americans admit to being stressed about finances, according to a separate CNBC Your Money Financial Confidence Survey conducted in March, largely due to inflation, rising interest rates and a lack of savings.

Only 45% of adults said they have an emergency fund. For those who do have emergency savings, about 26% polled said they have less than $5,000 saved.

That survey found that 58% of Americans are living paycheck to paycheck.

Click to expand...

At a time when Americans are saddled with more credit-card debt and higher interest rates, a new bill is seeking to cap credit card annual percentage rates at 18%.

Sen. Josh Hawley, a Republican from Missouri, this week unveiled the Capping Credit-Card Interest Rates Act, highlighting how APRs have been climbing.
...
Consumers with a credit-card balance faced an average 22.16% APR during the second quarter, up from 16.6% a year earlier, Federal Reserve figures show.
...
The bill has a slim shot at passage even as credit-card debt rises, observers say. Americans now have $1 trillion in credit-card debt, up from $887 billion a year ago.
...
In a research note Tuesday, TD Cowen analyst Jaret Seiberg said the odds are low that Congress will pass Hawley’s bill, and said the senator is “staking out a populist position to energize voters.”

“A federal usury cap has been a nonstarter in the House. We do not see that changing,” Seiberg wrote. (Hawley is running for re-election next year, along with many others in the Senate. The terms of more than 30 senators expire in January 2025.)
...

Click to expand...

...
But here’s one more potential stock headwind, courtesy of our call of the day from Jefferies’ consumer team, led by Randal Konik, who warn of a “significant risk to consumer spending ahead,” from the looming resumption of student loan payments, which restart on Oct. 1.

They surveyed U.S. consumers with outstanding student loan debt, and found that 90% are “at least somewhat concerned about being able to meet all of their monthly expenses, while apparel, footwear, accessories, restaurants, and big-ticket items are likely to see the biggest pullbacks in spending.”
...

Click to expand...

Credit card companies are racking up losses at the fastest pace in almost 30 years, outside of the Great Financial Crisis, according to Goldman Sachs.

Credit card losses bottomed in September 2021, and while initial increases were likely reversals from stimulus, they have been rapidly rising since the first quarter of 2022. Since that time, it's an increasing rate of losses only seen in recent history during the recession of 2008.

It is far from over, the firm predicts.

Losses currently stand at 3.63%, up 1.5 percentage points from the bottom, and Goldman sees them rising another 1.3 percentage points to 4.93%. This comes at a time when Americans owe more than $1 trillion on credit cards, a record high, according to the Federal Reserve Bank of New York.

"We think delinquencies could continue to underperform seasonality through the middle of next year and don't see losses peaking until late 2024 / early 2025 for most issuers," analyst Ryan Nash wrote in a note Friday.

What is unusual is that the losses are accelerating outside of an economic downturn, he pointed out.
...

Click to expand...

pmbug said:

Credit card losses are rising at the fastest pace since the Great Financial Crisis

Goldman Sachs predicts credit card losses will continue to climb through the end of 2024 or early 2025 for most issuers.

www.cnbc.com

Consumers are struggling to make payments on credit card debt while the economy is "good". Imagine what will happen when the economy falters...

Click to expand...

pmbug said:

The kicker is going to be when debt destruction bleeds out of consumer credit (card) markets to housing/mortgage and other debt markets. That's going to hurt banks and cause even tighter lending requirements in the housing markets.

Click to expand...

More Americans think they’re in danger of falling behind on their debts.

People’s expectation of missing a minimum payment on a debt — anything from credit cards, to auto loans to student loans and mortgages — increased in September to the highest level since May 2020, according to the Federal Reserve Bank of New York’s Survey of Consumer Expectations, released Tuesday. Survey respondents said there was a 12.5% chance on average that they would not be able to make the minimum required payment on a debt, up 1.4 percentage points from the previous month.

Two groups reported the biggest increases in worries about debts in September: Those who are below the age of 40 and who have some college education, and those with an annual household income below $50,000, the researchers said.
...
Americans’ credit card debt topped $1 trillion in the first and second quarters of 2023, a record high, according to New York Fed data. As the Fed has raised interest rates to tamp down inflation, borrowing has become more expensive, with the average cred-t card annual percentage rate now at 24.45%, according to LendingTree, the highest since the online lending marketplace started tracking it in 2019.
...

Click to expand...

Americans now owe $1.08 trillion on their credit cards, according to a new report on household debt from the Federal Reserve Bank of New York.

Credit card balances spiked by $154 billion year over year, notching the largest increase since 1999, the New York Fed found.
...
Credit card delinquency rates also rose across the board, according to the New York Fed, but especially among millennials, or borrowers between the ages of 30 and 39, who are burdened by high levels of student loan debt.

With most people feeling strained by higher prices — particularly for food, gas and housing — more cardholders are carrying debt from month to month or falling behind on payments, and a greater percentage of balances are going more than 180 days delinquent, according to a separate report from the Consumer Financial Protection Bureau.

Nearly one-tenth of credit card users find themselves in "persistent debt" where they are charged more in interest and fees each year than they pay toward the principal — a pattern that is increasingly difficult to break, the consumer watchdog said.
...

Click to expand...

searcher said:

States Where Credit Cards Are Used To Cover Living Expenses

Researchers at Upgraded Points identified which U.S. states rely most heavily on credit cards to cover basic living expenses.

upgradedpoints.com

Click to expand...

The problem isn’t inflation. It’s prices.​

The consumer took a spending break ahead of the holiday season, with October retail sales, excluding autos and gas, falling by 0.08%, and core retail, which also removes restaurants, declining by 0.03%, according to the new CNBC/NRF Retail Monitor.

The new Retail Monitor, debuting Monday, is a joint product of CNBC and the National Retail Federation based on data from Affinity Solutions, a leading consumer purchase insights company. The data is sourced from more than 9 billion annual credit and debit card transactions collected and anonymized by Affinity and accounting for more than $500 billion in sales. The cards are issued by more than 1,400 financial institutions.

The data differs from the Census Bureau's Retail Sales report as it is the result of actual consumer purchases, while the Census relies on survey data. The government data is frequently revised as additional survey data become available. The CNBC/NRF Retail monitor is not revised as it's calculated from actual transactions during the month. It is, however, seasonally adjusted, using the same program employed by Census.
...
"The Retail Monitor heralds a new era of retail intelligence, where data isn't just a resource – it's a roadmap to understanding and engaging with the modern consumer," Affinity Solutions CEO and founder Jonathan Silver said. Affinity is also a leading provider of data to Wall Street.

In coming months, the Retail Monitor will provide demographic breakdowns of spending by age, income and geography.

Click to expand...

How America Racked Up A $1 Trillion Credit Card Bill​

... according to economist Carl Weinberg.

"Consumers are just waking up to the fact that they're financing their spending by running up their credit cards, and that the interest on those credit cards is over the top, out of control, off the hook right now," the chief economist of High Frequency Economics told CNBC's "Squawk Box Europe" on Wednesday.

"That's going to lead to, I think, a retrenchment in consumer spending, as we get into the new year."

Weinberg's base case assumes a slowdown in growth, rather than a recession.

"But the risk is, and I agree it's a nontrivial risk, that consumers get into trouble," Weinberg said, noting figures from the New York Federal Reserve showing a rise in delinquencies on credit cards.

"Real incomes have just started coming back again, and not by nearly enough to cover some of the increases in the debt burdens that we're seeing. So credit to the household sector, consumer credit cards, that's where the downside risk is. That's where the risk to this Goldilocks forecast is, and I'm watching it."
...

Click to expand...

... the share of credit card debt falling behind for the first time climbed to 8% in the third quarter. That’s up from 6.5% in the first quarter of 2023.

It’s been more than a decade since the share of 30-day credit card delinquency was that high, according to household debt statistics from the Federal Reserve Bank of New York.

At a time when markets wonder about the ongoing strength of consumers and their mood, new Goldman Sachs estimates say credit card delinquencies will keep rising in the new year.

The rate of new credit card delinquencies will climb to 9.5% by the first half of 2024 before it eases to around 9% by the end of the year, researchers said in a Thursday note. Low-income card holders will be strained the most, they added.
...
Data is showing more people missing mortgage payments. The default rates on past-due Federal Housing Administration loans reached a nine-year high in November.

Though overall mortgage delinquency rates are still below pre-pandemic levels, it’s a trend “worth watching” one observer said.

Click to expand...

BUY NOW POOR LATER (BNPL) - LIVING A LAVISH LIFESTYLE ON CREDIT CARD DEBT - THIS IS ECONOMIC SUICIDE​

WALMART ADDS BUY NOW, PAY LATER TO SELF-CHECKOUT​

pmbug said:

Buying an apple pie on credit? America!

Click to expand...

...
According to new data that was just released by the Federal Reserve, consumer borrowing increased much faster than expected during the month of December…
...
For quite a while, U.S. consumers were able to handle rapidly rising debt levels, but now it appears that we are reaching a breaking point.

In fact, we are being told that “delinquencies are at their highest level since 2012”…
...
And actually the average credit card interest rate is even higher than anything that we witnessed back then…

Click to expand...

...
Loan defaults certainly rose in the fourth quarter at Capital One. The company's net charge-off rate on domestic credit cards jumped to 5.35%, up from 3.22% a year earlier. Charge-offs have risen sharply from their ultra-low levels during the COVID-19 pandemic, when stimulus funds and higher consumer savings helped cardholders stay on track.

But cardholders are now falling into delinquency status in the same seasonal patterns that were evident prior to COVID-19, so the post-pandemic worsening appears to have "run its course," said Capital One CEO Richard Fairbank.

"We feel great about where we've stabilized, and we see really a good assessment of our future," Fairbank said Thursday on the McLean, Virginia-based company's earnings call.

The upbeat outlook lines up with that of Synchrony Financial, another major credit card issuer that said it expects losses to peak soon at levels a bit above their pre-pandemic range.

The relatively rosy outlook at those two companies contrasts with a gloomier forecast by Discover Financial Services, which said its credit card losses will be significantly above 2019 levels. The card issuer Bread Financial also reported a sharp rise in charge-offs last quarter.
...
Stephens analyst Vincent Caintic was a bit more downbeat about Capital One, telling clients that charge-offs stabilizing 15% higher than they were in 2019 "doesn't put us at ease." He also flagged the sharply higher charge-offs and delinquency figures in the fourth quarter as a sign of "increasing consumer stress."

"Although management reiterates confidence that credit has normalized, we don't see it in the data," Caintic wrote.
...

Click to expand...

Workers are paying to get part of their paychecks early. It’s ‘payday lending on steroids,’ one expert says​

• 
  So-called “earned wage access” programs allow workers to take a portion of their paychecks before payday, often for a fee.
• They’ve grown rapidly: $9.5 billion in wages was accessed early during 2020, triple the $3.2 billion accessed in 2018, according to the latest data by Datos Insights.
• However, in some cases, high fees and frequent use can translate to an annual interest rate of more than 330%, according to experts, regulators and consumer advocates.
• EWA programs are also known as daily pay, instant pay, accrued wage access, same-day pay and on-demand pay.

100-year-old explains how he still has $1 million saved: 'I always lived within my means. I'm not a gambler.'​

• The number of people age 100 and older is expected to grow eight-fold by 2050.
• Bill Stovall shows what it's like to live for a century without running out of savings.
• "I always lived within my means," he said. "I'm not a gambler."