Americans’ credit scores have fallen for the first time in a decade. As always, the mainstream media is putting a positive spin on this – saying the economy is strong, or that these trends aren’t severe enough to signal financial distress. The truth is, this credit situation is destroying Americans’ financial well-being.
On today’s show, you’re going to hear the latest statistics on credit scores and mounting consumer debt. We’re going to talk about the sharp divide between savings and credit card debt, why high inflation and high interest rates are a deadly combo, and much more.
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Data from the Federal Reserve showed that the growth of credit card debt actually slowed in the first quarter. It sounds like good news, and it will probably be regarded as such in the echo chamber that is the mainstream news.
The truth is that while growth did slow, Americans still added over $6 billion to their liabilities column, in the form of consumer debt. It shouldn’t be surprising to anyone that credit card growth is finally slowing down a bit, especially since the average APR for commercial credit cards hit a new record high of over 21%.
With this perfect storm of high interest rates, inflation, and student loan payments resuming, a spending slowdown is inevitable. It’s not sustainable to keep spending and spending money that you don’t have.
In fact, 1 in 3 Americans have maxed out cards due to the effects of inflation according to a survey by debt dot com. Meanwhile, more and more banks are recording rising charge-offs and delinquencies quarter after quarter…
Credit card debt is still at a record high. Let’s not pretend everything is suddenly fine.
So when you see reports that consumer spending will normalize, it begs the question – how? There is no good ending to this type of trajectory.
We know that inflation and recessions are incredibly difficult hurdles for people with lower credit scores.. and rising interest rates make it extremely difficult to pay down credit card debt, especially for those who are just trying to make ends meet.
A new survey from Ipsos found that “35 to 54-year-olds rely on their credit card for emergency expenses at twice the rate of those over 55 — which is maybe unsurprising, given that less than half of the younger Americans said they had enough money saved for an unexpected expense, compared with 70% of those over 55.” The Ipsos Consumer Tracker also linked these generational gaps in spending and saving habits to an important factor we should all consider: financial literacy.
The sooner we are honest about how dire this situation is, the more likely it is that people will be able to develop the financial education they need to get out of credit card debt.
The entire credit card landscape is a minefield designed to trap people with high interest rates and low minimum payments. This is a system created to damage young people, low-income demographics, and frankly anyone who is down on their luck or doesn’t have the financial intelligence to know better.
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