(5MinNewsBreak.com) – Amid surging credit card defaults, Americans face a financial storm not seen since the 2008 crisis, as $46 billion in debts have been written off in 2024.
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The financial strain falls hardest on low-income families who have exhausted their savings.
Credit card defaults in the United States have surged to their highest levels since the aftermath of the 2008 financial crisis.
Credit card issuers have been forced to write off staggering amounts of delinquent loans, hitting $46 billion in just the first nine months of 2024.
This alarming spike—a 50% increase over the previous year—is a clear sign of significant loan distress as lenders determine that borrowers are unlikely to repay their debts, Breitbart News reports.
Adding to the turmoil, the rise in defaults highlights the severe financial pressures on consumers stemming from prolonged inflation and higher borrowing costs.
This predicament predominantly affects the bottom third of U.S. consumers, who currently have a savings rate of zero.
Conversely, high-income households continue to fare much better.
Moody’s chief economist Mark Zandi remarked, “High-income households are fine, but the bottom third of U.S. consumers are tapped out. Their savings rate right now is zero.”
Further compounding these daunting economic challenges, credit card rejection rates have surged in 2024, affecting a broad spectrum of credit applications.
According to the New York Fed, “Reported rejection rates for credit cards, mortgages, auto loans, credit card limit extension applications and mortgage loan refinance applications all rose in 2024.”
The Federal Reserve’s attempts to curb excessive spending and inflation through heightened interest rates have only deepened the crisis.
With interest rates increasing, credit card holders are burdened with rising borrowing costs, resulting in $170 billion in interest payments by September 2024.
Further challenges loom, with consumers struggling to access credit for essential purchases like auto loans and mortgages, especially those with low credit scores.
With mounting delinquencies, analyst Odysseas Papadimitriou noted, “Consumer spending power has been diminished.”
This dire financial landscape indicates that more Americans may fall behind on payments in the coming months, underscoring the urgent need for relief.
As many hope for a reduction in interest rates, the Federal Reserve hints at only modest cuts by 2025, further perpetuating financial uncertainty.
Is there a looming US debt crisis? https://t.co/LZ0NxvBzL6 US credit card defaults are increasing rapidly. That suggests a coming economic crisis.
— Richard Murphy (@RichardJMurphy) December 30, 2024
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