Americans are worrying about missing their credit card payments

In a sign of growing financial stress, more Americans expect to fall behind on their credit card payments soon.

According to the New York Fed’s latest survey, the average probability that Americans would miss their minimum credit card payment over the next three months rose to 13.6% in August, the highest level since April 2020.

By comparison, this figure was less than 10% in February 2022.

Delinquency expectations have been rising steadily since early 2022, or just before the Federal Reserve began raising interest rates.

According to the New York Fed study, delinquency expectations have risen as more Americans report deteriorating financial conditions.

“Perceptions about households’ current financial situations deteriorated slightly, with fewer respondents reporting being better off than a year ago and more respondents reporting being worse off,” the report said.

“Year-ahead expectations also deteriorated somewhat, with a larger share of respondents expecting to be worse off,” it continued.

Faced with growing financial pressures, more Americans have cut back on spending to pay their bills. Credit card payments have become a bigger problem due to rising balances and soaring APRs.

As the cost of living rises, credit card balances continue to grow

By the end of the second quarter, Americans collectively owed a record $1.14 trillion in credit card debt.

TransUnion estimates that the typical American has an average credit card balance of $6,329, though Experian data puts this figure at $6,501. All the while, credit card APRs continue to eclipse record highs.

According to the Consumer Financial Protection Bureau (CFPB), average credit card interest rates reached 22.8% in 2023. By comparison, they were less than 13% one decade earlier.

The CFPB said most of the increase has come from “APR margin” as credit card companies stack profits due to a lack of competition.

It’s no wonder that a staggering 39% of Americans worry they won’t have enough money to pay their bills on time, based on a recent CNN poll. This figure eclipsed the highs seen during the Great Recession between 2007-2009.

The same survey showed that 37% of Americans reported taking on more credit card debt to afford basic necessities, such as groceries.

Meanwhile, a separate survey from TD Bank revealed that 30% of consumers have reduced their spending due to rising bills and concerns about personal finances and the economy.

“The daily cost of living is rising for many Americans,” said TD’s head of credit cards and secured lending, Chris Fred.

These findings are consistent with research from Moody’s Analytics, which showed that the typical U.S. household is spending $925 more each month to purchase the same products as three years ago.

Grocery prices have been one of the biggest sources of inflation. As Creditnews reported, grocery costs have increased by 25% since the start of the pandemic.

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