Credit Card Debt Surpasses Pre-Pandemic Levels and worsening delinquency rates are following. Younger borrowers have higher credit card debt than older borrowers and delinquency rates for consumers in their 20’s, 30’s and 40’s are higher than older borrowers. The fact that younger borrowers are struggling to repay their credit card and auto loans even while federal student loans repayments have been paused is a concern as repayment on the student loans are scheduled to resume later this year. Regulators and lawmakers are looking at credit card companies to explain the deterioration in underwriting standards and how credit cards were issued at a record pace in the past couple of years. With delinquency rates rising, US households are estimated to pay roughly $12 billion in late fees annually.
One could argue that the rise in credit card debt and delinquencies comes as no surprise, given an increase in credit demand, interest rates increasing and high inflation, but it is also important to point out that credit card companies were not as diligent with their underwriting process. The historically low unemployment rates has kept consumers’ financial footing generally strong, but stubbornly high prices and climbing interest rates is testing some borrowers’ ability to repay their debts. The current situation is hard to predict, but we see a prolonged period of struggles for borrowers to pay their debt.
For businesses this will result in even slower growth in 2023, and the need to cut operational costs. It also means that businesses need to stay current in the marketplace. Cutting costs and digitizing their business to reach more audiences may be the only way to stay financially strong during this time. We can help. Contact us today to learn more.