US Consumer Debt growing

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I owe nobody nuffin.

It's interesting: We hear stories like the above, and most of the high-level debt slaves pooh-pooh it off. Yah, yah, my interest is only $XX.xx a month, yada yada.

But...four years ago I foolishly took a bath (I shouldn't say "invested") in an RV rig. I tried to use logic - a pickup truck (market-desirable) and a trailer (tried to pick one that holds its value better). I bought, and rather than cash in PMs, I borrowed. They make it easy. Oh, lordy, they make it easy. The payment was well within my means; but I'd have had it until long after I die. Over ten years, at 4 percent (then).

Well, the story's been told. Vaxxident, far from home - head-on, other driver dead. Maybe dead before impact. All equipment involved, totaled out. Amazingly, all I got out of it was whiplash - and the incredible hassle of getting home with a lot of expensive camping-trip gear. I made it.

Insurance paid it off, after a little more hassle than I expected. All's well that ends well - for me, at least.

But, now. My monthly costs are rent and electric. And, even though I'm below the poverty line in income...I have PLENTY more money coming in than I'm spending. Just a week ago, getting nervous about my high bank balance (over $6k) I went and bought more krugerrands.

The little savings add up, fer sure. And the peace of mind of not having to worry about unseen expenses, is a joy beyond price.
 
CiscoKid said:
I keep a credit card for emergencies and always keep it paid off. Most months, I don't even get a bill in the mail because there is no balance.
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Us cards (2) for all purchases so I can get points that convert to $$$. When the points reach money stage the cash is deposited to an account that pays interest.

Cards paid off monthly (on line - no checks.)

Owe nothing. Everything paid off. It's a nice feeling to be debt free.
 
Credit card delinquencies surged more than 50% in 2023 as total consumer debt swelled to $17.5 trillion, the New York Federal Reserve reported Tuesday.

Debt that has transitioned into "serious delinquency," or 90 days or more past due, increased across multiple categories during the year, but none more so than credit cards.

With a total of $1.13 trillion in debt, credit card debt that moved into serious delinquency amounted to 6.4% in the fourth quarter, a 59% jump from just over 4% at the end of 2022, the New York Fed reported. The quarterly increase at an annualized pace was around 8.5%, New York Fed researchers said.

Delinquencies also rose in mortgages, auto loans and the "other" category. Student loan delinquencies moved lower as did home equity lines of credit. Overall, 1.42% of debt was 90 days or more past due, up from just over 1% at the end of 2022.
...
While the rise in delinquencies happening from low levels, the trend "bears watching because it is happening while the economy is still growing," said Joseph LaVorgna, chief economist at SMBC Nikko Securities.

"What happens if the economy slows and unemployment quickly rises? Delinquencies could surge, in turn leading to a self-reinforcing credit crunch," LaVorgna said in a note. "In other words, a mild downturn could turn into a deep one."
...
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"Garbage Deals": Dealership Puts Customers In Cars With $3,000 Monthly Payments​

A New York Fed survey published earlier this week indicated that, in the fourth quarter of 2023, auto loan delinquencies reached levels not seen since right after the Great Recession more than a decade ago.

As a refresher, the data from Tuesday by the Federal Reserve Bank of New York showed (read: ZH report here) the rate at which car owners are behind on their payments hit an annualized rate of 7.7%, the highest level since 2010.

"Delinquency transition rates have pushed past pre-pandemic levels, and the worsening appears to be broad-based," researchers at the NY Fed wrote in a blog post.

More:

 
The Meek won't inherit the Earf.

The Stupid will get it.

And this is what they do.

Judas Priest...who the hell needs an expensive car (truck, most cases) when the whole nation is melting down with a Camp-Of-The-Saints collapse? It's not WORTH it. Get something (relatively) cheap and old and overlooked by arse-wholes who'll happily chuck rocks at anything looking valuable.

Water finds its own level, and that aquifer is a low one.
 
Tangentially related to the thread:
Capital One Financial Corp. is exploring a potential acquisition of credit-card lender Discover Financial Services in a major move that would rank as its largest-ever deal, people with knowledge of the matter said.

McLean, Virginia-based Capital One is working with advisers and has been holding talks with Discover about a deal, the people said, asking not to be identified because the information is private. If it's able to reach an agreement, an announcement may come as soon as this week, according to the people.
...
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www.americanbanker.com

Capital One weighs acquisition of Discover

Capital One Financial has been holding talks with Discover Financial Services about a deal, according to people with knowledge of the matter.
www.americanbanker.com www.americanbanker.com
 
Looks like Capital One is going to acquire Discover. Reports are that the deal is done. "Great" news because...

...
The CFPB on Friday released a survey of 84 banks and 72 credit unions that found large credit card issuers offered the highest interest rates across all credit scores. ...
...
The median interest rate charged by large credit card companies was 28.2% compared with 18.15% charged by small issuers, to consumers with good credit — typically credit scores between 620 and 719, the CFPB said.
...
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www.americanbanker.com

Big banks charge higher credit card APRs than smaller issuers, CFPB says

The median interest rate that large credit card issuers charged consumers with good credit in the first half of 2023 was 28.2%, compared with 18.15% at smaller banks and credit unions, according to a study by the Consumer Financial Protection Bureau, which is on a campaign against excessive fees.
www.americanbanker.com www.americanbanker.com
 
It's obviously not for the heavy consumer debt. Used to be, a business in debt beyond its MarketCap was a "zombie" corporation. Well, the plastic debt-slaves are now zombies.

I'd wager they're buying the whole of the purchase and credit history of the Discover customers.

Not that it will do any good, once the full collapse hits...
 

Capital One's $35 billion Discover deal hinges on playing consumer champion​

Feb 21 (Reuters) - Capital One's (COF.N), opens new tab chances of getting its $35.3 billion deal for Discover Financial (DFS.N), opens new tab past regulators hinge on the bank showing it can disrupt the close-knit U.S. credit card industry, five experts in corporate law interviewed by Reuters said.

Investors are assigning only a 50% chance to the deal being completed amid concerns the proposed acquisition could become a lightning rod for U.S. regulators and lawmakers fretting over high credit card interest rates and fees.

To boost its chances of getting the deal approved, Capital One will have to show it will share some of the deal's $2.7 billion in projected pre-tax cost-savings with consumers, the people said.

"At the end of the day, the current regime of regulators wants to know if, and how, this merger will benefit consumers," said Abiel Garcia, a former deputy attorney general for the California Department of Justice who is now an antitrust lawyer with Kesselman, Brantly & Stockinger.

More:

 
... More than one-third of U.S. households (36%) say they are carrying more credit-card debt month to month than they have in emergency savings funds, according to a new survey by Bankrate. That’s the highest percentage since polling began in 2011.

That was more likely to be the case for Gen X and millennial consumers, the survey found. Meanwhile, baby boomers were more likely to say their emergency savings exceeds their credit-card debt.

“The 60% of U.S. households living paycheck to paycheck are really feeling it, and necessities rather than discretionary items are increasingly being put on credit cards,” Greg McBride, chief financial analyst at Bankrate, told MarketWatch. Because credit-card interest rates have climbed to 20% or higher, the fact that more consumers are using them to finance purchases “is a clear sign of financial strain,” he added.
...
“Credit-card balances are rising and so are delinquencies. This indicates elevated financial stress on consumers,” said Amy Crews Cutts, senior economist for financial services company Primerica PRI, +0.35%. Like McBride, she also blames “the high cost of just getting by” rather than overspending.

Just 3% of middle-income households (incomes between $30,000 and $130,000) surveyed by Primerica said their incomes have gone up faster than the cost of living, despite slowing inflation and rising incomes. The firm estimates that over the two and a half years from May 2021 to October 2023, middle-income households on average spent $2,445 more than the rise in incomes on necessity items alone (food, gas, utilities and healthcare, excluding insurance).
...
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www.marketwatch.com

Many Americans’ credit-card debt now towers over their savings. Here’s how to build an emergency fund while paying off debt.

More than one-third of U.S. households (36%) say they are carrying more credit-card debt month to month than they have in emergency savings funds, according...
www.marketwatch.com www.marketwatch.com
 
By some measures, credit cards have never been this expensive. For cardholders who carry a balance without paying it off in full each month, issuers generally charge interest based on annual percentage rates (APRs). In 2022 alone, major credit card companies charged over $105 billion in interest, the primary cost of credit cards to consumers. While the effects of increases to the target federal funds rate have received considerable attention, the average APR margin (the difference between the average APR and the prime rate) has reached an all-time high.

In this analysis, we show that higher APR margin drove about half of the increase in credit card rates over the last decade. In 2023, excess APR margin may have cost the average cardholder over $250. Major credit card companies earned an estimated $25 billion in additional interest revenue by raising APR margin. Increases to the average APR margin - despite lower charge-off rates and a relatively stable share of subprime borrowers - have fueled issuers’ profitability for the past decade. Higher APR margins have allowed credit card companies to generate returns that are significantly higher than other bank activities.

Credit card average APR margin is the highest on record.

Over the last 10 years, average APR on credit cards assessed interest have almost doubled from 12.9 percent in late 2013 to 22.8 percent in 2023 — the highest level recorded since the Federal Reserve began collecting this data in 1994. The APR on most credit card accounts can be viewed as being composed of the prime rate and the APR margin. The prime rate (a benchmark most banks use to set rates) represents a good proxy for banks’ funding costs, which have increased in recent years. But credit card issuers have also sharply increased average APRs beyond changes in the prime rate.

Nearly half of the increase in average APR over the last 10 years has been driven by issuers raising their APR margin. APR margin for revolving accounts is now at 14.3 percent, the highest point in recent history. ...
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www.consumerfinance.gov

Credit card interest rate margins at all-time high | Consumer Financial Protection Bureau

The annual percentage rate (APR) margins, the amount of interest credit card issuers charge cardholders on top of benchmark rates, have reached an all-time high.
www.consumerfinance.gov www.consumerfinance.gov
 
Here's the FDIC statement:
...
The increase in noncurrent loan balances was greatest among CRE loans and credit cards. Weak demand for office space is softening property values, and higher interest rates are affecting the credit quality and refinancing ability of office and other types of CRE loans. As a result, the noncurrent rate for non-owner occupied CRE loans is now at its highest level since first quarter 2014, driven by portfolios at the largest banks. Similarly, the noncurrent rate for credit card loans is at its highest level since third quarter 2011.

Driven by writedowns on credit cards and CRE loans, the industry's quarterly net charge-off rate increased 14 basis points to 0.65 percent, a rate that is 17 basis points higher than the pre-pandemic average rate.
...
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www.fdic.gov

Remarks by FDIC Chairman Martin Gruenberg on the Fourth Quarter 2023 Quarterly Banking Profile

FDIC-Insured Institutions Reported Full-Year 2023 Net Income of $256.9 Billion and Fourth Quarter 2023 Net Income of $38.4 Billion.
www.fdic.gov www.fdic.gov
 
Buying now and paying later is still a popular way to splurge on airfare to Cabo. It’s an increasingly common way to buy groceries and lawn furniture, too.

Consumers ages 35 and under comprise 53% of “buy now, pay later” users but just 35% of traditional credit card holders, according to LexisNexis Risk Solutions. Many of those core “BNPL” borrowers have grown so comfortable using the installment loans for just-out-of-reach luxuries that they’re putting more everyday purchases on them as well.


Apparel and accessories were the most popular product category among millennial (ages 30-44) and Gen Z (18-29) users of the BNPL provider Afterpay in 2021 and 2022. But last year it fell to fourth place behind “arts, travel and entertainment,” “home and garden” and “hardware,” according to data the company provided to NBC News.

www.nbcnews.com

'Buy now, pay later' goes from niche to normal as young people use it for daily essentials

What began for many as a way to pay for concert tickets and vacations is becoming an ordinary tool that Gen Z and millennial shoppers use for food, contact lenses and trash bags.
www.nbcnews.com www.nbcnews.com
 
Some of that 53% is folks having trouble with cash flow, and some of it is people trying to take advantage of cashback/miles/rewards. The growth in late payments would seem to indicate that the percentage having trouble with cash flow is growing.
 
pmbug said:
Debt up, rates up, fucked up:

Credit Card Debt Surges To New All-Time High, Just As Card APR Rates Hit Fresh Record | ZeroHedge

ZeroHedge - On a long enough timeline, the survival rate for everyone drops to zero
www.zerohedge.com www.zerohedge.com
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People have stopped caring.

Planning ahead, in this era of deliberate chaos...planning is for fools. Look at what happened to people who saved for a big purchase, or for retirement.

My ex's father used to buy his cars with cash. This was back in the Reagan years of prosperity, and he was a professional, a chemical engineer. He had a family, and his cars were all (three of them) newish. He always bought new; didn't believe in buying someone else's problems; but he paid up front.

Imagine such a person now. I'm not saving for a car now because what I have should last me all my life, and if it doesn't, most of us will be walking in a decade, anyway. I've done all the savings I'm going to.

But a young person, thrilled to be making $16 at the car wash, will find that the $28k car he had hoped to buy, when he started, is now $48k. The $140k home he hoped to someday afford, is now $800k.

Who can save? What are banks paying, now? Two percent?

Just party hardy. Various intoxicants are legal, now, and some are encouraged; so smoke it, enjoy it, charge your Bug Muc on your CC account, have it delivered by DoorDash, and don't think about tomorrow.

Tomorrow everything collapses. May as well put your debt into that inferno pile.
 
Casey Jones said:
I owe nobody nuffin.

It's interesting: We hear stories like the above, and most of the high-level debt slaves pooh-pooh it off. Yah, yah, my interest is only $XX.xx a month, yada yada.

But...four years ago I foolishly took a bath (I shouldn't say "invested") in an RV rig. I tried to use logic - a pickup truck (market-desirable) and a trailer (tried to pick one that holds its value better). I bought, and rather than cash in PMs, I borrowed. They make it easy. Oh, lordy, they make it easy. The payment was well within my means; but I'd have had it until long after I die. Over ten years, at 4 percent (then).

Well, the story's been told. Vaxxident, far from home - head-on, other driver dead. Maybe dead before impact. All equipment involved, totaled out. Amazingly, all I got out of it was whiplash - and the incredible hassle of getting home with a lot of expensive camping-trip gear. I made it.

Insurance paid it off, after a little more hassle than I expected. All's well that ends well - for me, at least.

But, now. My monthly costs are rent and electric. And, even though I'm below the poverty line in income...I have PLENTY more money coming in than I'm spending. Just a week ago, getting nervous about my high bank balance (over $6k) I went and bought more krugerrands.

The little savings add up, fer sure. And the peace of mind of not having to worry about unseen expenses, is a joy beyond price.
Click to expand...
You have done well, Grasshopper.
 
Casey Jones said:
People have stopped caring.

Planning ahead, in this era of deliberate chaos...planning is for fools. Look at what happened to people who saved for a big purchase, or for retirement.

My ex's father used to buy his cars with cash. This was back in the Reagan years of prosperity, and he was a professional, a chemical engineer. He had a family, and his cars were all (three of them) newish. He always bought new; didn't believe in buying someone else's problems; but he paid up front.

Imagine such a person now. I'm not saving for a car now because what I have should last me all my life, and if it doesn't, most of us will be walking in a decade, anyway. I've done all the savings I'm going to.

But a young person, thrilled to be making $16 at the car wash, will find that the $28k car he had hoped to buy, when he started, is now $48k. The $140k home he hoped to someday afford, is now $800k.

Who can save? What are banks paying, now? Two percent?

Just party hardy. Various intoxicants are legal, now, and some are encouraged; so smoke it, enjoy it, charge your Bug Muc on your CC account, have it delivered by DoorDash, and don't think about tomorrow.

Tomorrow everything collapses. May as well put your debt into that inferno pile.
Click to expand...
The last new cars I have bought are a Caddy, a Dodge van, and a Camry. All cash.

No home/land mortgage. <-- This was possible because of the discipline my Daddy taught me. He explained to me over 75 years ago what fiat really was.
 
arrested-development.gif
 
...
Credit Card Performance Worsened to Historical Levels

Credit card performance further deteriorated at the end of 2023, with firms recording the worst 30+, 60+, and 90+ account-based days past due levels in the reporting series. Notably, card performance usually declines in the fourth quarter. Stress among cardholders was further underscored in payment behavior, as the share of accounts making minimum payments rose 34 basis points to a series high from last quarter’s reading. The share of accounts making full balance payments did tick up 8 basis points in the fourth quarter, but the 3.1 percent increase in revolving balances implies higher card balances among a smaller group of revolvers. Median origination credit scores jumped 2 points, supporting data from the Senior Loan Officer Opinion Survey that suggest that credit card lending standards at most large banks tightened somewhat or remained unchanged in the fourth quarter of 2023. However, current credit scores at the 10th and 25th percentiles of cardholders decreased to their lowest levels since the first quarter of 2020, indicating further performance deterioration could be on the horizon.
...
Click to expand...

Large Bank Credit Card and Mortgage Data 2023 Q4 Narrative

by Brandon Goldstein & Caleb Hoover - April 10, 2024
www.philadelphiafed.org www.philadelphiafed.org

...
The numbers signal added pressure on US household finances amid higher costs of living. About 10% of credit-card borrowers now have an account balance that exceeds $5,200, according to the Philadelphia Fed. One-quarter of active accounts have a balance of over $2,000 for the first time.
...
The Philadelphia Fed found that credit scores at the 10th and 25th percentiles of cardholders decreased to their lowest levels since the first quarter of 2020, indicating further performance deterioration could be on the horizon.
...
Click to expand...

finance.yahoo.com

Credit-card delinquency rates were worst on record in Fed study

(Bloomberg) -- US credit-card delinquency rates were the highest on record in the fourth quarter, according to a Federal Reserve Bank of Philadelphia report.
finance.yahoo.com finance.yahoo.com
 
You'd have had to be blind not to see it coming.

We went from people complaining of the rising costs of essentials, to charging many of them, including food. Running up a debt that they have no plan how to pay off. Meantime, the almost-20-percent interest balloons the balance.

Next comes delinquency in payments, of course. Then the card is turned off; the rent is not paid, the car is repossessed, and another person or family is on the sidewalk or in a shelter.

Economic and societal collapse.
 

Focus: Buy now, pay later lender Affirm pushes into elective medical procedures​

April 23 (Reuters) - Fintech lender Affirm (AFRM.O), opens new tab has started quietly offering "buy now, pay later" (BNPL) loans for elective medical procedures, in a major push beyond its core e-commerce market, the company told Reuters.

Over the past year, Affirm has more than doubled the number of elective medical merchants on its network, reaching around 130 at of the end of 2023. The San Francisco-based company is hoping to tap growing consumer demand for financing for cosmetic treatments, dental services, medical devices and veterinary procedures.

"A lot of these price points are about $2,000 and above, so that suits our installment product... really well," Pat Suh, Affirm's senior vice president of revenue, said in an interview.

While Affirm has been adding elective medical providers since the middle of last year, it has not previously discussed or publicized its push into the sector, the first by a major BNPL provider in the U.S. market, the company said.

Affirm's installment product charges between 0% and 36%, depending on the purchase price and a borrower's credit profile.

"It's a smart growth strategy," said Ted Rossman, senior industry analyst at Bankrate, a consumer finance publisher. "They're already doing a lot with e-commerce, and that'll continue to grow, but it's always about the next big thing."

In 2022, the global market for cosmetic procedures and dental services combined was worth more than half a trillion dollars, market research firm Grand View Research estimated.

More:

 
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