Recent economic data suggests that consumers in Maryland and across the country are struggling to pay their credit card bills. A report released by the Federal Reserve Bank of Philadelphia on April 10 reveals that 30-, 60- and 90-day credit card delinquency rates all rose sharply in the fourth quarter of 2023. The percentage of credit card accounts that are past due by 30 or 60 days is even more worrying. That figure reached a level not seen since the federal reserve started tracking credit card delinquency data in 2012.
Minimum payments
By the end of the fourth quarter of 2023, almost 3.5% of the credit card accounts in the United States were at least 30 days delinquent. That is a 30-basis-point increase from the previous quarter. Experts are worried that delinquency rates could climb even further because more consumers are making minimum monthly payments that do little to reduce their debt. This figure rose by 34 basis points in the fourth quarter of 2023.
Inflation and high interest rates
Consumers are struggling because a combination of inflation and interest rate hikes have made the goods they buy more expensive. The average credit card interest rate in the United States has climbed to 20.75%, which is the highest cost of borrowing for revolving debt in decades. This is a problem because cash-strapped consumers often rely on their credit cards to pay for necessities like food during times of financial stress. When even minimum monthly credit card payments become unaffordable, bankruptcy may be their only option.
A fresh start
When financial situations become unmanageable, bankruptcy provides an escape from overwhelming debt and offers the possibility of a fresh start. Filing for Chapter 7 or Chapter 13 also puts at least a temporary end to harassment from creditors and bill collectors.