delinquencies and household debt went up last quarter

The New York Fed: Inflation, Debt, and Delinquencies in the US Household Debt and Credit System (Document Report)

Total US household debt hit a record $16.9 trillion during the fourth quarter, an increase of $394 billion, or 2.4%, from the prior three-month period, according to the Fed’s latest Quarterly Report on Household Debt and Credit. While the lion’s share of the debt is attributable to mortgage loans, a report showed that delinquencies are on the rise as well.

Credit card balances increased nearly 6.6% to $986 billion during the quarter, the highest quarterly growth on record, according to New York Fed data that goes back to 1999. Year over year, credit card balances grew 15.2%.

The Federal Reserve raised its rates over the last year in order to combat high inflation. According to the New York Fed report, the housing sector took a hit due to rising interest rates.

“As long as people have jobs, as long as the labor market remains tight, they’ll continue spending — even in the face of additional challenges,” he said. It speaks to the challenge of fighting against inflation.

Ted Rossman, a senior industry analyst for Bankrate, stated in a statement that it was triple trouble for credit card borrowers. Credit card balances are going up, rates are going up and more people are carrying credit card debt.

As of December, 2.5% of outstanding debt was in some stage of delinquent, compared to 4.7% at the end of the year, but despite a good labor market environment, this is a cause for concern.

At the end of 2022, 18.3 million borrowers were behind on a credit card, according to New York Fed researchers. That compares to 15.8 million at the end of 2019.

If there were to be a deterioration in the labor market, that would be worrisome for consumer debt and delinquency levels, New York Fed researchers said.

The New York Fed researchers wrote that they didn’t anticipate widespread stress for lender portfolios as balances remain at or below pre-pandemic levels. The financial distress is real, and the delinquent marks will affect their access to credit for many years to come.

The end of the federal student loan forbearance could result in increased education loan delinquencies and also lead to a rise in credit card and auto loan delinquencies.

A restart of student loan payments “is absolutely going to put more pressure on the consumer and force people to make touch choices,” Mike Loewengart, head of model portfolio construction at Morgan Stanley, said in an interview with CNN.

How we went from near-record savings to record debt in just two years: An administrative medical assistant in the midst of a financial crisis

When she was signing up to serve food at the party for her children’s daycare, she realized how much her finances had deteriorated.

She is an administrative medical assistant who helps people with disabilities get services. She had never really had debt and had always been good with money. But during the pandemic, Roth went through a divorce and her finances and lifestyle changed dramatically.

“I was literally looking at the list thinking, ‘What has inflation not messed with?’ And I signed up for bananas, because they’re still 59 cents a pound.”

Source: https://www.npr.org/2023/03/08/1161407261/how-we-went-from-near-record-savings-to-record-debt-in-just-two-years

How much money do we spend? A woman’s experience with high-interest debt and the importance of spending time with her kids, whose parents are housebound

Roth took control of her children and became their primary care provider. That is a large amount on a salary of approximately $40,000 a year. Consider the cost of daycare. “It’s like $1,500 a month,” she says. “That’s 50% of my paycheck right there.”

Her paycheck couldn’t cover the extra expenses, so she used her credit card to pick up the slack. Her balances started to grow. Her credit card company was raising its interest rates from 15% to 22%, at the same time.

Millennials like Roth have seen their debt rise by nearly 30% since before the pandemic, to about $3.8 trillion. What’s so strange about this is that back in 2021, that debt had fallen to near-record lows.

Americans across the income stream save a lot of money. I mean a lot of money,” says Jill Schlesinger, CBS news business analyst and author of The Great Money Reset.

Schlesinger says the rising price of basics, like food, gas and clothing, have landed millions of Americans in real financial distress. “For a lot of people, this is not, ‘I’m going out and buying something fancy,'” she says. Things are more expensive, you have to pay more to keep up with where you were last year.

She watched her debt balloon and her minimum payments. She had unforeseen expenses that spiraled out of control like when her daughter fell and needed two stitches. That cost her $800.

It feels like it’s crushing sometimes. I don’t know how that’s going to happen, I think I have to pay this back. I will be 300 when it is paid off if I just do the minimum payments.

She made too much money to qualify in every case. I make enough to not be poor enough to get services,” Roth says with a laugh. “I don’t know how to get by, because I am so poor.” You don’t know.

Most of the time, a little bit more than the minimum payment isn’t enough forRoth. She worried her kids were missing out on things.

“That’s probably my biggest focus is making sure that they are having those fun, memorable moments,” she says. This is a hard time in their lives and it’s been so hard that they could be given some happiness. We’ve been through a lot over the last few years. She would like to have enough money to take her children to the build-a-bear store or to ice cream on a whim.