Amid ongoing economic challenges, the financial strain on American households has reached a critical point, with credit card delinquencies soaring to their highest levels in 12 years. This troubling trend reflects the broader economic difficulties exacerbated by President Joe Biden's economic policies, often referred to as "Bidenomics."
The latest data from the Federal Reserve reveals that credit card charge-offs and delinquencies surged in the first quarter of 2024, surpassing pre-pandemic levels. Specifically, the charge-off rate climbed from 3.48% in the third quarter of 2023 to 3.96%, while the delinquency rate increased from 2.83% to 2.97%. These figures mark a significant departure from the stable 2.0-2.5% band observed in the seven years preceding the pandemic.
Credit card delinquency rates… worst since 2011-2012 pic.twitter.com/vIMLIYZ4kw
— Mike Zaccardi, CFA, CMT 🍖 (@MikeZaccardi) July 28, 2024
The economic strain is not confined to credit cards alone. Auto loan delinquencies have also spiked, reaching 7.3% in the second quarter of 2023, levels not seen since the Great Recession. This increase is particularly impacting low-income earners, who have exhausted their pandemic-era savings and are now grappling with rising costs of living and stagnant wage growth.
One of the driving forces behind this financial distress is the persistent inflation that has gripped the economy. Despite recent efforts by the Federal Reserve to curb inflation through aggressive interest rate hikes, the cost of everyday necessities like food, gas, and housing remains prohibitively high. As a result, many Americans are resorting to credit cards to manage their expenses, leading to higher balances and increased delinquencies.
🚨BREAKING : CONSUMER Crisis as Credit Card Delinquency 📈
**Near Historic Peaks:** U.S. rates hit 94.8% of their peaks of 2008.
– Nationwide Impact: All regions saw at least a 32.2% increase in delinquent debt.
– Richest Hit Hard: Delinquency in wealthy ZIP codes rose 54%. pic.twitter.com/5LJzbDM5P8
— The Coastal Journal (@1CoastalJournal) June 11, 2024
The impact of these economic policies is felt acutely by the working poor and middle class. Reports indicate that the number of people making hardship withdrawals from their retirement accounts surged by 36% in the second quarter of 2023 compared to the same period in 2022. This trend underscores the precarious financial situation many households face as they struggle to make ends meet under the current economic conditions.
Critics argue that the Biden administration's anti-fossil fuel stance has further exacerbated the economic pain. The increased cost of energy, which is central to most economic activities, has contributed to the overall rise in prices across the board. This has led to a higher financial burden on consumers, particularly those in lower-income brackets.
In response to these challenges, some consumers have turned to buy-now, pay-later services to cover basic necessities like groceries, highlighting the extent of the financial strain. Retailers such as Nordstrom, Macy’s, and Kohl’s have reported rising delinquency rates on private-label credit cards, further illustrating the widespread impact of the economic downturn on consumer spending and financial health.
The Biden administration's economic policies, intended to support middle and lower-income Americans, appear to be falling short. As credit card delinquencies continue to rise, the question remains: can the current economic strategy be adjusted to better address the needs of struggling households, or will the financial distress deepen further?
