Broker Check
Research Highlights - 03/06/2024

Research Highlights - 03/06/2024

March 06, 2024

In the past couple of months, there has been newly published economic data illustrating just how challenging maintaining a balanced household budget has become. Credit card debt has ballooned to more than $1.129 Trillion, while the typical interest rate on that debt hovers at a lofty level of 21.47%. This combination of high debt (likely driven higher by overall price inflation) and the accompanying high interest has meant that households are having a much tougher time making ends meet. The result has been plummeting household savings and rapidly rising credit card delinquency of 90 days of more.

Over the past 20 years (since January 1, 2000), credit card delinquency of 90 days or more has averaged 9.02%, just below the current 9.74%. During this time, delinquencies have oscillated from a low of 5.65% in Q3'00 (just prior to the '00-'01 recession) to a high of 13.73% in Q1'10 (following the Great Financial Crisis '08-'09). For most of timeframe, the interest rates on credit cards averaged around 13.73%. Today, rates on credit cards are 56.4% higher than their twenty-three-year average, wreaking havoc on households' disposable income at a hefty 21.47% interest rate.

The current level of credit card debt is $1.129 Trillion, or 49.3% greater than the long-term average (since Jan. 1, 2000) of $756 Billion. Though the long-term average of household savings of $810.24 Billion is very near the current level of $809.15 Billion, there's been a volatile downward reset since Q2'20 when household savings catapulted to $4.424 Trillion. The decline of household savings from Q2'20 to Q1'24 represents an 81.7% loss.

Whether it's post-pandemic behavioral issues like "revenge spending" or more correlated economic conditions like widespread price level inflation, the current dynamic is unsustainable. The result of spending most of the pandemic era "helicopter money" and now carrying much higher debt which is subject to much higher interest costs, places most Americans in a precarious situation. The beginnings of which are plainly seen in rapidly rising delinquency rates.