Consumer debt is on the rise, and Americans are having a harder time keeping up. According to the Federal Reserve Bank of New York, borrowers owed $18.04 trillion in total debt in the fourth quarter of last year, a 0.5% increase year over year.
Serious delinquencies on auto loans and credit cards are becoming a real problem. The Fed’s report noted that borrowers who are 90 days or more behind on payments reached a 14-year high in Q4 2024.
With auto loans reaching a total of $1.66 trillion during the quarter, higher loan amounts on cars are partially to blame. Over the past five years, vehicle prices have increased due to disruptions related to manufacturing materials and the pandemic.
“Many Americans simply have to have a car to get to work, so that’s often one of the highest priorities when paying bills,” said Matt Schulz, chief credit analyst at LendingTree, per CNN. “If they’re struggling to make those payments, it could be a sign that they’re struggling to make others as well.”
Credit Card Balances Are Overwhelming American Consumers
Standing at an all-time record of $1.21 trillion, higher balances on credit cards are also pushing consumers to the brink of financial collapse. Credit card utilization rates reached nearly 24% in tandem with growing balances, per the Fed’s report.
Rising interest rates also pushed balances higher, forcing minimum monthly payments to go up as well. The New York Fed reported that credit card delinquencies grew to 7.18% in the last quarter.
“For people who are carrying a balance … a higher interest rate is going to make those balances rise more quickly, it’s also going to make the payments higher on a monthly basis,” the New York Fed researchers said, per CNBC.
In January, the Federal Reserve Bank of Philadelphia issued statistics revealing an alarming number of borrowers pay no more than the minimum payment on credit cards. By paying only the minimum, borrowers hardly make a dent toward total repayment.
Of course, credit card balances are likely to increase at the end of most years for one particular reason — holiday shopping. Compared to 2023, Americans added an average of $1,181 to their credit card balances in the last three months of 2024.
