Credit card delinquencies hit an all-time high

More Americans are falling behind on their credit card payments than ever before, underscoring the growing financial burden of "higher for longer" interest rates.

According to the Federal Reserve Bank of Philadelphia, the share of credit card balances that were past due in the first quarter reached the highest level in nearly 12 years, or since the Fed began tracking the data.

“All measures of balance-based credit card delinquency rates posted their highest levels in the nearly 12-year history,” the Fed researchers wrote.

Although the number of accounts at least 30 days past due declined in the first quarter, “account holders who are behind have larger balances left unpaid,” the researchers wrote.

Delinquency rates are rising as more Americans carry record credit card debt.

A separate study from the New York Fed showed that Americans collectively owed $1.12 trillion in credit card debt in the first quarter, just below the all-time high set in the first quarter of 2023.

Credit cards have allowed Americans to cushion rising prices by spending beyond their means. But with high interest rates and rising debt balances, they can only keep it up for so long.

Consumer confidence is running low

The higher cost of living is one reason Americans are struggling to pay their credit card bills on time.

Respondents in the most recent University of Michigan consumer sentiment survey said that inflation was their biggest financial worry. The same report showed that consumer confidence plunged to eight-month lows in July.

“Almost half of consumers spontaneously expressed complaints that high prices are eroding their living standards, matching the all-time high reached two years ago,” said Joann Hsu, the director of the University of Michigan survey.

According to a new CNN survey, 39% of adults said they’re worried that their income won’t be enough to cover all the bills. By comparison, this figure was 37% during the height of the Great Recession of the late 2000s.

More than one-third (35%) of survey respondents said they’ve taken on extra work just to be able to pay the bills.

That’s probably why most Americans don’t buy the “strong economy” narrative echoed by mainstream economists. In fact, nearly 60% of adults in a recent Affirm survey said they believed the economy was in a recession.

Lower-income Americans are even more likely to rate the economy as unfavorable. According to investment bank Evercore ISI, low-income earners have much less to fall back on if they lose their jobs or face unexpected expenses.

“The pickup in credit card debt and delinquencies is consistent with the idea that consumers—particularly those [at] the bottom of the income and wealth distributions—are running out of surplus savings and turning back to credit to finance their spending,” the investment bank said.