Bankrate’s Ted Rossman explains why debt continues to climb.
Transcript:
Ted Rossman: There’s some interesting things going on with credit card delinquencies. I know the Philadelphia Fed recently said they’re at an all time high. That’s in a data set that goes back 12 years. Other data sets have delinquencies backing off a little bit lately. Some companies, like American Express, actually say their delinquencies are lower now than they were pre-pandemic. So it’s kind of a mixed bag. The bark is, maybe worse than the bite. I don’t think it’s quite as bad as some of the headlines make it appear. All news is local, though. I mean, we have some cardholders that are saddled with record amounts of debt. They’re falling behind. Others are kind of humming right along.
So overall, I don’t see this as a threat to the economy or to card issuers, but they are tightening around the margins. There are some people with lower incomes and lower credit scores who are finding it harder to get credit, because banks are worried they might not pay them back.
And what are some of the most common reasons people are falling into credit card debt?
Credit card debt usually has practical causes. Contrary to popular belief, it’s not usually something silly like a vacation or a shopping spree. It’s usually something practical. Emergency expenses are number one. That’s medical bills, car repairs, home repairs, things like that. And then second place would be day to day expenses. That’s been all too common in the past few years, with high inflation and the cost of living just going up
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