By Samuel Gonzalez
May 18, 2024, 7:57 PM EDT
Credit card delinquencies are becoming a worrying issue, as is inflation. After the exorbitant price increases of recent years and an index that has not yielded in recent months, More and more consumers are turning to plastics to make their essential purchases, getting into debt and keeping it for a long time.. Not surprisingly, the poorest areas of the United States suffer the most from both phenomena, a new report says.
The Federal Reserve Bank of St. Louis published an article on its institutional blog this week highlighting its concerns about increasing delinquencies on credit cards.
Looking at credit card debt in particular, the Federal Reserve found that financial hardship was greater than pre-pandemic levels, and 3.10% of American households were in this position.
As if this were not enough, during the first quarter of 2024, the delinquency rate of 10% of zip codes had grown 41% since the third quarter of 2022going from a rate of 14.9% in that period to 21% in the current one.
However, although the delinquency rate of the 10% richest ZIP codes in the United States had the largest increase in the same period at 54%, going from 4.8% in the second quarter of 2022 to 7.4% in the first quarter from 2024, It is still a much lower default rate compared to that of the poorest areas of the country.
Furthermore, it should be noted that in the poorest areas of the country, Credit card delinquencies are very close to their highest peak since 1999, at 93.6%which reflects how complicated it is to maintain financial stability for these households.
For a person to enter a period of financial difficulties, must have an “account past due for 30 days or moreexcluding serious derogatory debt, which is more than 120 days past due.”
Inflation exacerbated the problem by reducing purchasing power, forcing households to use more of their savings to maintain their consumption patterns or to top up their credit cards. 48% of households with a credit card maintain a balance each montheven for a short period.
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