Financial experts are warning credit card holders of mounting debt as data shows rising number of Americans are only completing their minimum payments every month.
The Philadelphia Federal Reserve‘s Q3 2024 Insights Report has revealed that 10.75 percent of creditors were only making their mandatory payments in the third quarter of 2024.
It also noted that more consumers are falling behind on their monthly card payments as 30-day delinquency rose by 10 percent to a staggering 3.52 percent.
The rise in delinquent accounts has doubled since the pandemic-era low of 1.57 percent in the second quarter of 2021.
Brian Riley, Director of Credit at Javelin Strategy & Research explained to Payment Journal: ‘The economy is still in tender shape and credit card managers should be aware that there are subtle elements that drive risk.
‘The current trend of increased consumers paying only the minimum due is a predictive metric that illustrates household budgets are under continued stress.
‘What is important here is that not all card segments are showing signs of stress, but the most fragile segments – those with low FICO Scores, lower incomes, and less experience with credit – indicate downfield risk in 2025.
‘When you consider that revolving consumer debt is at an all-time high, the problems of inflation continue to stress household budgets, and issuers must keep a keen eye on vulnerable portfolio indicators.’
Financial experts are warning credit card holders of mounting debt as data shows rising number of Americans are only completing their minimum payments every month
Concerns about increasing credit debt were also highlighted in 2024’s DFAST stress tests that are also conducted by the Federal Reserve.
These tests ‘assesses whether banks are sufficiently capitalized to absorb losses during stressful conditions while meeting obligations to creditors and counterparties and continuing to be able to lend to households and businesses’, according to the Reserve’s website.
Results showed that banks would face a projected total credit loss of roughly $684 billion – out of which $175 billion would be from consumer credit cards alone.
‘Credit card issuers surely make increased income when consumers pay only their minimum due payments, but the revenue is short lived when charge offs move towards 6 percent to 7 percent,’ Riley said.
‘That is far beyond the 3.5 percent comfort zone issuers managed two years ago.’
Concerns about increasing credit debt were also highlighted in 2024’s DFAST stress tests that are also conducted by the Federal Reserve
Results showed that banks would face a projected total credit loss of roughly $684 billion – out of which $175 billion would be from consumer credit cards alone
According to NerdWallet, with average credit card balances being at $10,563, it would take 22 years and $18,000 in interest to just pay the minimum.
It also noted that one in five Americans who currently have revolving credit card debt claim to make only minimum payments on their cards.
‘A lot remains unknown. We’ve seen in the past few days how quickly things might be changing.
‘With higher prices, people are going to turn to credit cards more to use for necessities. You tack on higher interest rates and then you have more difficulty getting by.
‘If they’re only making the minimum payment, you can go very quickly from getting by to drowning,’ Elizabeth Renter, senior economist at personal finance company NerdWallet explained.
A New York Fed survey from December 2024 shows that the average perceived probability for missing a minimum debt payment over the next three months stood at 14.2 percent.
Source: Record number of Americans are making a risky credit card mistake
