Americans are not okay financially, according to the Philadelphia Federal Reserve.
The share of active credit card accounts making just the minimum payment hit a 12-year high of 10.75% from July through September 2024, based on data from the largest banks in the country, the Philadelphia Fed said on Wednesday. As credit card balances swell, the share of delinquent balances is also worsening, it said.
Despite broader economic data showing that consumers remain resilient and spending is strong, these data paint a different picture.
“These credit card data are showing warning signs of consumer stress,” said Andrew Kish, assistant vice president in the Financial Monitoring Group of the Philly Fed. “More borrowers are falling behind on their credit card payments…We’ll be closely watching these performance measures in the coming quarters to monitor the health of consumers.”
Why do data tell such different stories?
Broad economic indicators and statistics lump all consumers together in what’s called aggregate data, which means unique experiences of consumers at different income levels can get overlooked, economists said.
“The disheartening truth is that upper-income consumer segments can largely offset the struggles at the lower end,” Wells Fargo economists said in a report earlier this month. Upper-income consumers can boost “overall consumer spending to still run above 2% this year and signal ‘business as usual’ when it is anything but usual for a large segment of the population.”
For lower-income consumers, credit reliance is up and saving rates are down, the economists said.
Lower and middle-income household saving rates turned negative in early 2022 as those consumers drew down rainy-day funds for the better part of two years, Wells Fargo said. Savings are positive again but below pre-pandemic levels.
“What appears as stout spending today comes at the cost of more vulnerable finances for the working poor,” they said.
