topic Re: Average consumer carries $6,218 in credit card debt in Credit in the News

Average consumer carries $6,218 in credit card debt

Thomas_Thumb — Thu, 16 May 2024 17:17:59 GMT

As a result, credit card delinquency rates are higher across the board, the New York Fed and TransUnion found. Over the last year, roughly 8.9% of credit card balances transitioned into delinquency, the New York Fed reported. According to TransUnion's research, "serious delinquencies," or those 90 days or more past due, reached the highest level since 2010.

https://www.msn.com/en-us/money/personalfinance/average-consumer-carries-6218-in-credit-card-debt-as-more-borrowers-are-falling-behind-on-their-payments/ar-BB1mv4z6

The higher APRs are a catalyst for delinquency - IMO. Unfortunately further increases appear likely.

Re: Average consumer carries $6,218 in credit card debt

CreditCuriosity — Fri, 17 May 2024 02:41:06 GMT

I agree unfortunately it has to get worse before it gets better so inflation can be tamed. As long as people are going after the same goods and services inflation will persist and rates will remain high and defaults will go up. Once people hit a tipping point where enough is to much or they can't charge anymore cause they defaulted and don't have said credit less people will be going for those goods/services and prices and inflation can start to be tamed. Vicious situation we are in. Also the printing press is another situation. As you know many things cause inflation.

Re: Average consumer carries $6,218 in credit card debt

FlaDude — Thu, 16 May 2024 22:38:57 GMT

@Thomas_Thumb wrote:
Over the last year, roughly 8.9% of credit card balances transitioned into delinquency, the New York Fed reported.

I had no idea the delinquency rate, but that's a lot higher than I would have guessed.

@Thomas_Thumb wrote:
The higher APRs are a catalyst for delinquency - IMO. Unfortunately further increases appear likely.

Yeah, it certainly could be contributing.

Re: Average consumer carries $6,218 in credit card debt

FicoMike0 — Fri, 17 May 2024 03:39:14 GMT

Do you think if all of us on myfico ran our utilization up for a month, we could goose that number? I think mine got to $1600 last month, probably more like $200 this month. Turn the crank one way, it goes up...

Re: Average consumer carries $6,218 in credit card debt

iced — Wed, 22 May 2024 18:06:09 GMT

Does this only account for people carrying balances more than a month, or are they looking at statement balances and saying that's the debt load? I have larger statements now than I used to (and more than $6218 isn't that uncommmon), but I'm still PIF each month -- does TU see that as carrying $6218 in credit card debt or $0?

Re: Average consumer carries $6,218 in credit card debt

Slabenstein — Wed, 22 May 2024 19:46:51 GMT

@iced wrote:
Does this only account for people carrying balances more than a month, or are they looking at statement balances and saying that's the debt load? I have larger statements now than I used to (and more than $6218 isn't that uncommmon), but I'm still PIF each month -- does TU see that as carrying $6218 in credit card debt or $0?

The $6,218 number is from Transunion, so it would be reported statement balances, since that's what they have access to. So a cardholder who charges $6,218 in a statement cycle and PIF's after statement cut would count as "carrying" $6,218 in credit card debt that month, by CNBC's phrasing.

ETA: It took some looking, but I found the source of the $6,218 number. The CNBC article links to TU's Unsecured Personal Lending Industry Insights Report for Q1 2024, which is interesting but appears to be about unsecured personal loans, rather than credit cards. The TU Quarterly Overview of Consumer Credit Trends for Q1 2024 gives $6,218 as the aveage bankcard balance per consumer. TU's Credit Industry Snapshot for April 2024, which is a newer report but covers a shorter period, gives an average bankcard balance per consumer of $6,201. For reference, here's a snip of the relevant table from the Q1 Consumer Credit Trends document:

Re: Average consumer carries $6,218 in credit card debt

Creditsen — Wed, 22 May 2024 22:41:50 GMT

@Slabenstein wrote:
@iced wrote:
For reference, here's a snip of the relevant table from the Q1 Consumer Credit Trends document:

This is interesting. The average credit line per consumer and per account caught my eye, as well.

Re: Average consumer carries $6,218 in credit card debt

DoppelgangerD — Wed, 29 May 2024 05:45:11 GMT

Yeah these statistics about carrying debt always makes me roll my eyes, because they're counting all balances, even if they are paid in full after statement closing.

I mean technically they're correct, because even if you PIF every month, it is still a loan, albeit an interest free one if paid by due date, but a loan nonetheless, and technically debt.

I guess it's just the way the headlines read, making it sound like everyone who uses credit cards are in serious debt trouble.

Re: Average consumer carries $6,218 in credit card debt

Thomas_Thumb — Wed, 29 May 2024 15:06:12 GMT

The greater point in all this is the increase in delinquency rate. It was up 50% in 2023.

Re: Average consumer carries $6,218 in credit card debt

Slabenstein — Wed, 29 May 2024 15:43:56 GMT

This is from the St. Louis Fed. CC delinquency rates aren't historically high, but they have shot up significantly since the pandemic days of low rates and stimulus checks. We're nowhere near the rate of delinquencies that came in the wake of the 2008 financial crisis, thankfully. (But, as someone who's basically ignorant of the science of economics, I don't know the value of these kinds of comparissons in trying to assess our current climate.)

Re: Average consumer carries $6,218 in credit card debt

Thomas_Thumb — Thu, 30 May 2024 00:07:18 GMT

It's all about the pain. In 2022 we exited the what I call the era of "nearly free money" dating back to 2001. All that cheap money helped bring about the current inflationary spiral. The abnormally low Fed rates in 2019-2021 coupled with flooding the economy with new money fueled the fire. Kinda reminds me of some companies that issue/sell new stock for deficit spending all the while diluting shareholder value.

Those of us on fixed income really feel the impact when purchasing essential goods/services. It's even worse for those trying to pay back delinquent debt due to the record high APRs. See pastes below,

The delta between CC interest rates and the Fed rate has been increasing. CC issuers are leveraging APR to finance rewards program bloat and to generate obscene profit margins at the expense of the less fortunate. The new cap on late fees (unfortunately not APRs) suggests APR gouging will continue unabated.

For insight into the current climate, check out the links.

https://www.consumerfinance.gov/about-us/blog/credit-card-interest-rate-margins-at-all-time-high/

https://www.moneycrashers.com/average-credit-card-interest-rate-by-year/

Re: Average consumer carries $6,218 in credit card debt

Slabenstein — Thu, 30 May 2024 17:56:39 GMT

I think these two graphs are pretty interesting, in regards to credit card rate margins.

Prime rate, 1994-present:

Average bankcard APR, 1995-present:

Prime rate right now is in the same range it was before the dot com crash and in the lead-up to the Great Recession, but average bankcard APR is drastically higher now than it was at either of those points (or at any point from 1995 to mid-2022).

Re: Average consumer carries $6,218 in credit card debt

DoppelgangerD — Thu, 30 May 2024 18:45:14 GMT

@Slabenstein wrote:
I think these two graphs are pretty interesting, in regards to credit card rate margins.

Prime rate, 1994-present:

Average bankcard APR, 1995-present:

Prime rate right now is in the same range it was before the dot com crash and in the lead-up to the Great Recession, but average bankcard APR is drastically higher now than it was at either of those points (or at any point from 1995 to mid-2022).

That is because the new capitalist trend is to put as much financial stress as possible on consumers to find their breaking point, and to see how much they're willing to put up with before they decide to not participate with or purchase said products, whether it's food, vehicles, credit cards, etc...

Inflation is up slightly, but greedflation is up exponentially.

Re: Average consumer carries $6,218 in credit card debt

CreditPoor — Sat, 01 Jun 2024 16:51:23 GMT

interest rates will not be going down any time soon because they can't. If they were to lower interest rates it willl hyper accelerate inflation and be a disaster. You think delinquencies are high now, just wait a month or two when they tell you interest rates are forced to be increased again.

The US is almost 35 Trillion in debt. The Feds collect about 5 Trillion in taxes annually gross and spend 7.5 trillion which is unsustainable. The debt cannot be repaid and we are in some serious trouble. Kicking the can down the road and increasing the wealth gap is all they want to do.

Re: Average consumer carries $6,218 in credit card debt

Thomas_Thumb — Sat, 01 Jun 2024 23:44:55 GMT

Gotta up the tax revenue. Rates used to be substantially higher for companies and capital gains. (In 2017 corporate tax rate was cut to 21% from 35%). In the 1970s it was 50%. Capital gains tax rate was 30%-35% thruout the 70s vs 20% in recent years.

Closing tax loopholes, eliminating subsidies for dirty energy and stopping loan bailouts should be part of the plan.

Another 1% increase in prime rate is needed to relieve inflationary pressure - imo.

Re: Average consumer carries $6,218 in credit card debt

CreditCuriosity — Sat, 01 Jun 2024 22:52:38 GMT

Rate increase or increases are needed and less spending of $ we don't have are needed. Kinda like a consumer that overextends themselves it is not sustainable. Other stuff is likely needed as well whether tax increases or closing loop holes, etc. Look at Argentina they are getting it right as inflation is starting to tame in Argentina. It certainly hurts in the short term, but is needed by the actions they are taking imho. Nothing is free and the pain is going to get worse before it gets better. I honestly have no clue how we are ever as a country going to pay back 34-35 trillion dollars I just don't see that happening.

https://apnews.com/article/argentina-inflation-milei-single-digits-3cf0adca2cdf911fb04a06c3e9c6880d

Re: Average consumer carries $6,218 in credit card debt

Anonymalous — Sun, 02 Jun 2024 05:45:33 GMT

@Thomas_Thumb wrote:
Gotta up the tax revenue. Rates used to be substantially higher for companies and capital gains. (In 2017 corporate tax rate was cut to 21% from 35%). In the 1970s it was 50%. Capital gains tax rate was 30%-35% thruout the 70s vs 20% in recent years.

Closing tax loopholes, eliminating subsidies for dirty energy and stopping loan bailouts should be part of the plan.

Another 1% increase in prime rate is needed to relieve inflationary pressure - imo.

I agree they probably need to raise the prime rate even higher. They clearly haven't tamed inflation.

But I'm not sure raising taxes is a solution. I've heard the following graph called the "most remarkable chart in economics":

The red line is the highest marginal income tax rate in the US. The blue line is the actual money the federal government rakes in, from all sources. It's astonishingly stable, regardless of the tax rate. Since 1950, it's only varied from 17 to 20%. It's really hard to raise that number.

The problem is the spending. Pre-pandemic, the government spent about $4 trillion a year, and took in a little less than $4 trillion a year. Then the federal government spent about $6 trillion during the first year of the pandemic. That would be a lot, even if it was a one-time bump. But it wasn't. They've been spending at the same rate, ever since. It's completely out of control. Deficits were already high, but spending 50% more than you make just isn't sustainable.

Think of it this way. If the government was an average household, making $70,000 year, they'd currently be spending $105,000 a year. In total, they'd owe about half a million, using their squirrelly accounting rules (the official national debt), or $3 or $4 million if they were held to the same standards as regular households or businesses (i.e. including unfunded liabilities, which were over $240 trillion before the CBO stopped reporting them).

I'm not sure how to fix any of this. The math is crazy.

Re: Average consumer carries $6,218 in credit card debt

Thomas_Thumb — Sun, 02 Jun 2024 07:13:28 GMT

The key is corporate taxes and capital gains taxes. Not so much income tax such as wages. Revenue is required to service the debt let alone maintain a decaying infrastructure, public education and security both at home and abroad.

The United States is a debtor nation with a lust for consumption. Reducing consumption is part of the answer even though it can trigger a economic contraction. A contraction could help stem inflation with a downside of higher unemployment.

A few questions to ponder: Where did the wealth go? Has it been siphoned into corporations for redistribution to a select few? How much wealth has been transferred to off shore holding tax shelters and foreign domicile tax havens?

Another concern is the obscene wealth consolidation particularly since 2000. This pulls money out of the economy and lowers tax revenue. How did we get to this point?

Re: Average consumer carries $6,218 in credit card debt

Anonymalous — Sun, 02 Jun 2024 20:14:27 GMT

The 1950-2014 period includes huge differences in the corporate and capital gains rates as well, and they didn't move the revenue dial either. That 19% or so is very sticky. Though there is a solid argument that the drop in those tax rates has led to the ballooning of CEO paychecks.

Why does middle America seem to be struggling while the rich are getting richer? The early 1970s seem to be an inflection point. Up until that point wages rose with the overall growth of the economy, but that's when they started falling behind. Some point to the U.S. completely abandoning the gold standard, which removed the final check that prevented the government from printing money at will. Printing money causes prices to rise, but not all prices rise at once. Prices go up where the money is distributed and spent, and those who get the money first can spend it before prices jump, increasing their wealth relative to those who get it later, after prices have already risen. Since money comes in through the banking sectors, and then is distributed (loaned) as capital to businesses, and only gradually reaches workers as an increase in wages, this explains why the finance industry has gotten so huge, why asset prices like real estate and stocks are so high, and why paychecks haven't kept up.

Re: Average consumer carries $6,218 in credit card debt

Thomas_Thumb — Mon, 03 Jun 2024 06:04:27 GMT

Yes, a great deal of wealth is being siphoned out of the economy thru corporate entities (including hedge funds) and redistributed without generating tax revenue. Taxable income evaporates as monitary assets are transferred to business owners, company execs, board members and private equity firms. These "business expenses" drop earnings which result in lower taxable income and tax revenue.

Recipients of compensation and fees in the form of stock or options pay little or no tax on what they receive. Later, when the options are sold, a capital gains tax may create some revenue - unless such income is offset with "losses" from elsewhere.

Current tax policies have proven ineffective in generating intended revenue and counteracting wealth consolidation. Too many planned loopholes. Regardless, an increase in revenue is necessary. The government is unable to pay down debt and fund critical programs - yes that includes the EPA - irrespective of cost cutting efforts.