Main Topic: Americans' credit card debt reaches over $1 trillion for the first time ever.
Key Points:
1. Total credit card indebtedness rose by $45 billion in the April-through-June period, reaching $1.03 trillion.
2. Credit card delinquency rates have increased, with 30 or more days late climbing to 7.2% in Q2.
3. The rise in credit card balances reflects inflationary pressures and higher levels of consumption, while household income remains below pre-pandemic levels.
### Summary
📉 Americans could run out of savings as early as this quarter, according to a Fed study. Excess savings are likely to be depleted during the third quarter of 2023.
### Facts
- 💸 As of June, US households held less than $190 billion of aggregate excess savings.
- 💰 Excess savings refer to the difference between actual savings and the pre-recession trend.
- 🔎 San Francisco Fed researchers Hamza Abdelrahman and Luiz Oliveira estimate that these excess savings will be exhausted by the end of the third quarter of 2023.
- 💳 Americans are using their credit cards more, accumulating nearly $1 trillion of debt.
- 📉 The downbeat forecast raises concerns about the US economy as consumer spending is crucial for growth.
The majority of Americans are unable to pay off their credit card debt in full each month, with 51% of individuals rolling over their balances and accruing interest, according to a survey by J.D. Power. This marks a significant shift from previous years and is attributed to factors such as inflation, dwindling savings, rising interest rates, and increased everyday use of credit cards.
Despite reaching record levels of total credit card debt and household debt, Americans are actually managing their debt better than in the past due to inflation masking the impact on balances and lower debt-to-deposit levels, according to an analysis by WalletHub. However, the rising trajectory of credit card debt and the increasing number of households carrying balances raise concerns, especially considering the high interest rates, which can take more than 17 years to pay off and cost thousands of dollars in interest. Meanwhile, savers have the opportunity to earn higher returns on cash due to higher inflation and interest rates.
Consumer debt, including auto-loans and credit card balances, is increasing in the United States, but strong government intervention and temporary relief measures have created a cushion of extra cash savings, leading to a positive outcome for Bitcoin (BTC) according to Cointelegraph analyst Marcel Pechman.
The US government's debt has reached a record high of almost $33 trillion, causing concerns about its impact on the nation's finances and the risk of a debt crisis, according to experts like Larry McDonald, Ray Dalio, and Nouriel Roubini.
The second quarter of 2023 saw a consistent rise in borrowing among Canadians, with subprime borrowers experiencing the highest increase in credit balances due to higher spending habits and elevated interest rates on variable-rate loans. Demand for new credit also grew significantly, leading to a total Canadian household debt of $2.3 trillion.
Gross domestic product (GDP) grew at a rate of 2.1% in the second quarter of 2023, driven by consumer spending, while the Federal Reserve is considering raising interest rates again despite a drop in GDP growth; Americans are increasingly turning to credit cards in a high-interest rate environment, leading to rising credit card debt.
The debt of the United States has reached record levels and continues to grow, raising concerns among investment gurus and market minds about its long-term consequences on the economy and financial markets.
Americans are struggling to pay their bills as inflation rises, leading to a surge in credit card and auto loan defaults, which is expected to worsen with rising interest rates and the expiration of the student loan moratorium. Low- and middle-income earners are particularly affected, resorting to using credit cards for essential purchases, while opening new lines of credit to pay off debts, resulting in record-high credit card debt. The resumption of student loan payments and potential holiday season spending add to concerns about escalating debt levels.
The U.S. debt is expected to reach $2 trillion this year, doubling from the previous year, due to a decline in global economic growth.
US household wealth reached a record high of $154.3 trillion in Q2 2022, driven by a surge in stock market investments and real estate values, according to Federal Reserve data, providing consumers with a cushion to weather future economic storms and a potential increase in unemployment.
U.S. consumers have accumulated $43 billion in additional credit card debt during Q2 2022, three times the average amount since the Great Recession, and credit card interest rates have soared to over 20%, raising concerns about the impact of inflation and rising interest rates on consumers' ability to pay off their balances. However, some economists argue that higher wages are helping consumers keep pace with their debt, and the overall rate of charge-offs remains low. Nonetheless, the combination of spent-down pandemic savings and the resumption of federal student loan payments could pose challenges for lower-income borrowers and hinder consumer spending.
Despite increased household wealth in the US, millions of households are struggling financially due to inflation, high interest rates, and rising living costs, which have led to record levels of debt and limited access to credit.
US household income fell by the most in over a decade in 2022, showing the impact of rising costs and the expiration of pandemic relief programs, with the median income dropping 2.3% and marking the third consecutive annual decline, contributing to concerns about the financial well-being of American families.
US companies have experienced a 176% increase in debt defaults in the first eight months of 2023 compared to the same period in 2022, with high interest rates pushing businesses into financial distress, particularly in the media and entertainment sector.
The US's $32 trillion debt may not be as dire as it seems, as experts point out misconceptions about the national deficit and its impact on the economy. However, future debt problems could arise due to current spending rates.
The US national debt has reached a record high of $33 trillion, prompting the need for leaders to decide whether to raise the debt ceiling, as inflation continues to rise and there is a looming government shutdown.
Global debt reached a record $307 trillion in Q2 2023, driven by the United States and Japan, despite rising interest rates hampering bank credit, according to the Institute of International Finance (IIF).
US credit card debt reached $1 trillion for the first time, but experts argue that it is not a cause for concern as factors like income, wealth, spending growth, credit card utilization, and delinquency rates indicate that consumers are in good financial shape unless the US enters a severe recession.
The U.S. has a national debt of $33 trillion, raising concerns as the possibility of a government shutdown looms and lawmakers debate spending for 2024.
The cost of servicing the US debt is expected to reach a new record by 2025, as higher interest rates increase borrowing costs and push interest payments on the debt to $10.6 trillion over the next decade.
US mortgage rates have reached their highest levels in over 22 years, posing a major concern for citizens in the market for a new home.
The average long-term U.S. mortgage rate has climbed to its highest level since December 2000, increasing costs for borrowers and further limiting affordability in a market already out of reach for many Americans.
America's gross national debt has reached a record $33 trillion, surpassing its spending on national defense, and the rising interest rates will further worsen the situation.
Americans have $1.2 trillion more in excess household savings than previously estimated, which could be good news for the economy as it tries to address inflation and could delay the depletion of savings until next year, according to revised government data.
The average long-term U.S. mortgage rate has reached its highest level in over two decades, as borrowing costs continue to rise, impacting homebuyers' purchasing power and adding to the affordability crisis in the housing market.
American families experienced the largest increase in wealth in recorded history between 2019 and 2022, with rising stock prices, climbing home values, and government stimulus contributing to the overall financial progress, according to Federal Reserve data.
America's federal budget deficit doubled in the 2023 fiscal year due to slumping tax receipts, rising interest rates, and ongoing demand for pandemic relief benefits, reaching a deficit of $1.7 trillion; however, this number is actually smaller than last year's deficit due to an accounting mirage related to a student loan forgiveness program that was struck down by the Supreme Court.
The US posted a $1.695 trillion budget deficit in fiscal 2023, marking a 23% increase from the prior year due to falling revenues and increased outlays for programs such as Social Security and Medicare, as well as record-high interest costs on the federal debt.
The U.S. government posted a $1.695 trillion budget deficit in fiscal 2023, the largest since 2021, due to falling revenues and increased spending on Social Security, Medicare, and interest costs on the federal debt.
The US cannot rely on economic growth to solve its $33 trillion debt problem, as the debt-to-GDP ratio is projected to reach a record high by 2029, which could lead to unsustainable debt servicing costs due to higher interest rates.
American households are facing increasing delinquency rates on credit cards, mortgages, and auto payments as savings decline and interest rates rise, with credit card debt surpassing $1 trillion and delinquency rates reaching record highs, according to data from Equifax and Fitch Ratings. However, economists believe that this uptick in delinquencies is a result of the economy re-normalizing after the pandemic rather than signaling an impending downturn.
The US economy experienced strong growth in the third quarter of 2023, fueled by consumer spending, but there are warning signs of a possible recession due to the impact of rate hikes on auto loans, credit cards, and student debt, as well as higher borrowing costs and the potential for deeper recession if the Federal Reserve continues to raise interest rates.
Americans are facing difficulty in paying off their debts as savings decline and interest rate hikes increase financing costs, leading to an increase in credit card, mortgage, and autopayment delinquencies.
About two-thirds of Americans say their household expenses have increased over the past year, while only one-fourth report an increase in income, leading to concerns about financial futures, with most Americans having either rising or stagnant household debt.
About two-thirds of Americans report that their household expenses have risen in the past year, while only about a quarter say their income has increased, leading to concerns about financial futures and a significant amount of household debt.
