Unless you live under a rock, you have noticed a tremendous amount of inflation over the last couple of months. This inflation eats directly into one's disposable income when income does not keep up with inflation.
Household debt in the United states hit $15.8 trillion in the fourth quarter of 2021. This is an increase of $333 billion from the previous quarter. Credit card balances were up $52 billion raising the balances to $860 billion. That's the largest quarterly increase the Fed has seen since it's been collecting data over the past couple of decades. This surge was mostly driven by increases in home and car prices.
However, credit card balances are still lower than prepandemic levels, being $71 billion less than they were at the end of 2019.
The consumer price index rose 7.5% in January. Economists predicted that it won't get worse than that in 2022, but it follows a year of inflation that already raised prices on gasoline and groceries. Additionally, real wages have not kept up with inflation. That means there is less cash to spend on their expenses which will likely rack up credit card debt.
At the end of last year delinquency rates were low; only 3.2% of credit card debt was more than 90 days past due, although the feds consider this a "serious delinquency."
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