Bankrate has some interesting stats on credit card usage. Let’s take a look.
Please consider Nearly 2 in 5 cardholders have maxed out a credit card or come close since the Fed started raising interest rates.
Key Findings
- Credit Crunch: Nearly 2 in 5 cardholders (37%) have maxed out a credit card or come close since the Fed started raising interest rates, Bankrate’s Credit Utilization Survey found. That includes 20% who have maxed out a credit card and 17% who have come close to maxing one out.
- Credit cards are becoming Americans’ lifelines against high inflation: Over half of cardholders who’ve maxed out a credit card or come close (54%) blame inflation or high prices. Other top reasons include emergency expenses (38%) and carrying a balance or having credit card debt (32%).
- Maxing out and feeling the pinch: Of those who have maxed out their credit card or come close, 88% say it negatively impacted their personal finances in some way. This includes 41% who said their credit score declined and 31% who say they could not afford a necessary expense.
Utilization rates at an aggregate, nationwide level seem stable, even as credit card debt hit a new record of $1.14 trillion in the second quarter of 2024, according to the New York Fed’s Household Debt and Credit Report. The average credit card utilization rate was 21.3 percent in August, in line with a historic norm since 2011 of 20-22 percent and below the 30 percent rule-of-thumb that experts typically recommend, according to Equifax data.
Bankrate’s findings, however, offer a closer examination, revealing that some pockets of distress could be forming as some groups — particularly those who have been vulnerable to inflation — utilize more credit than others. Equifax data also shows that utilization rates have surged from where they stood in March 2022 (18.6 percent). Back in April 2021, meanwhile, the average utilization rate hit the lowest levels ever recorded (18 percent).
The youngest Americans — Generation Z cardholders (ages 18-27) — are more likely to have lower credit limits that lead to higher utilization rates, partially a feature of being new in their financial journey, according to New York Fed research. Yet, they are the least likely to report having maxed out a card (at 10 percent), though the most likely of the generations to have come close (at 21 percent), according to Bankrate’s survey.
Many households had no choice but to take on credit card debt — at a time when the cost of carrying a balance surged to the highest levels ever recorded. Just 44 percent of Americans say they would pay an unexpected $1,000 expense with cash from their savings account, according to Bankrate’s Emergency Savings Survey.
Black Americans (41 percent) and Hispanic (39 percent) Americans are most likely to have missed at least one payment due to a financial reason since the start of the year, compared with 27 percent of White Americans.
Millennials, meanwhile, are the most likely of the generations to have missed a bill for a financial reason since the start of the year, at 42 percent, followed by 34 percent for both Gen Zers and Gen Xers and 17 percent of baby boomers.
Pockets of Distress
I have been discussing “pockets of distress” all year.
Bankrate confirms the same groups I have been discussing: Younger adults, blacks, and the renters (non-asset holders).
My base case since early this year has been that how this group breaks will decide the election.
Trump’s Polling Momentum Is Real With Under Three Weeks to Go
Harris had huge momentum after Trump completely blew the debate. But little by little, Trump has gained.
I believe the economy is behind the move.
For discussion, please see Trump’s Polling Momentum Is Real With Under Three Weeks to Go
Momentum usually does not change unless there is an event. In football that might be an interception or a fumble. Now it could be anything, even something we don’t easily see.
That something most economists don’t see is the economy. For 67 percent of the nation (the asset holders and the home owners), the economy (the stock market) has been good to very good, offsetting inflation.
For the renters and struggling homeowners fed up with property insurance, food, and other inflation, the economy borders on miserable.
Who is that? Young voters, blacks, and those without a college education.
If you own stocks or refinanced your house at 3.0 percent, you likely are better off. And that’s a big majority. But that’s not who will decide the election. And it is a big part of why Harris is struggling.
If you want to understands Trump’s gains among black voters and young voters, look at credit card stress and inflation.
The Federal government needs to enact laws so states can file for bankruptcy. One of the conditions of bankruptcy would be for states to curb spending to 5% below what they collected in taxes the previous year. This creates personal budget surpluses the Fed can then use to pay down national debt. A strong US Dollar can destroy other countries that do not co-ordinate a similar debt reduction plan.
The Fed’s chart of retail spending by generation, clarifies credit card debt.
https://www.federalreserve.gov/econres/notes/feds-notes/a-better-way-of-understanding-the-u-s-consumer-decomposing-retail-spending-by-household-income-20241011.html
In 2018, spending of all generations were grouped together. Powell pivoted to lower rates in 2019 and took long-rates from 3 percent to 1.5 percent (the rate used to bailout the mortgage crisis). Millennials began to debt spend against the newly inflated value of their first home. Which defined the objective of the Fed’s zero/negative rate policy. When the pandemic hit the next year in 2020, the Fed had no option but to take long-rates to historic and inflationary low of 0.5 percent. Home prices skyrocketed, and so did Millennial spending. Boomers had experienced recessionary bouts before and conserved spending. Three rounds of monetary handouts drove spending in the generations without assets to inflate. Gen Z spending have been the most erratic. They seem to have the monetary sense of old west cowboys in town for the weekend.
it is our god given rights as amerikan empire to shop regardless of how much savings or production we do. bombs away for profits. remember when W the dumber told the nits wits to go shopping?
And yet consumer spending keeps powering forward, pushing off into the distance the inevitable recession by many, many months, if not years.
If you ‘max out’ a credit card you are failing at adult life.
The Mother of all Jubilee is Bankruptcy
amazing how many old geezers are ok with plumbers and bankers disgorging debt with government borrowed money but not some young students……….so dumb. divide and conquer in idiocracy is so easy.
Banker earn an honest living. /s
Students party while enrolled in DEI studies. Those that end up in HR (lately called DEI departments), I would make pay double.
you do know how the student debts can be extinguished without declaring bankruptcy don’t you old gal? i know tons of folks who have mastered this trick.
as long as israel is first and the C suites of wall street bankers( my lifetime pals). and the C suite in MIC, also lifetime pals……….get the moolah from the nit wit middlebrows who are the tax cows and cannon fodder for wars, all is good in the empire.
Interest on the National Debt apparently hit 1.1 trillion in the recently ended fiscal year. That’ s a lot of tax money which buys nothing for the tax payer.
Helps seniors on fixed incomes.
Pays for foreign wars
ISRAEL FIRST IS JOB NUMBER ONE FOR ALL AMERIKANS. AT ANY COST
The interest wasn’t paid for with tax money… it required new borrowing. Pure Ponzi finance.
Tax receipts still exceed interest payments.
For now..
Borrowing is for spending
It makes no sense to own a credit card unless (a) you want to work on boosting your credit score; (b) you want to travel. You should always have a reserve of cash on hand for your emergency funds. Using a credit card as a temporary line of credit is unwise.
It makes perfect sense to own credit cards if you pay off the balance monthly. We live off our credit cards for all the rewards. We have received thousands in free gift cards.
Laura, what’s your net worth? Are you debt free?
Become debt free and lower your credit score.
America’s “lifelines” against inflation? Good grief. I assume these words are Bankrate’s drooling, not Mish’s. With 24%+ interest rates on accounts that meet minimum monthly payments, “anchor around the neck” is a better description.
That itself is the big reason young complain about not being able to afford to buy a house. Credit is for big ticket items only and not for current consumption. If you don’t learn that early you won’t make it.
don’t use debt for anything. r/e or autos or anything including one’s businesses one might own. life is much easier and the bottom line is much easier to make work.
Some folks grow up and develop discipline.
My repeatedly paid off cards make life easier.
But couldn’t pass up RE borrowing at 2.75% with offsetting saving paying 5%.
.
Nah, use the cards like cash.
They are convenient and much safer than cash.
Just pay off in full every month as if it were a court order or an IRS levy.
Millstone works too.
Fair balanced article.
Will what is going on change peoples behavior when it comes to spending?
How can it not.
Party till dawn mentality becoming an unaffordable lifestyle for the younger generations.
People with assets are scaling back and spending in a more modular manner.
By this it means still doing things but not going all in to complete a project. Compartmentalizing into phases so as funds become available then go ahead with next phase.
Grandma and Grandpa lived like this for decades. Living within ones means,
Now things are coming full circle as lack of spending ability and credit affordability force lifestyle change to one of moderation.
For those who find themselves trapped by debt they will be looking for someone who can offer a way out of the dilemma in Leadership choice.
Sure, leadership.
Jobs for everyone and more Lebensraum too!
SPX might be peaking. A correction/recession will foster prosperity and spending splurge at least for several years. 1M SPX : 2009 to 2020 lows // parallel from 2014
high.
That’s probably a very bad sign for many industries. I would guess that the majority of people pay Bill’s with Earnings, and use CC’s for Entertainment.
With that being said, If the CC’s are maxed out, then that leaves only 2 Choices:
1. Don’t Pay Necessary Expenses, and slowly fall behind, get kicked out of your living space, and have your transportation repossessed.
2. Stop going out to Eat, Stop going out for Drinks, Stop playing Golf, Slow down Hair Cuts, Color, Accessories, Lower the Heat/AC, Etc.
These will be drastic times, and they will call for drastic change in “Behavior” The one’s that can do it successfully will be OK, but those who cannot, will suffer a great deal eventually, as the clock will eventually Run Out!
You think credit card use might be linked to economic conditions, such as recessions?
You asked a silly question, for the answer you are looking for, which is just as silly. Too vague, but I will give you the right answer to the question you should be asking.
– Q) You think credit card use might be linked to economic conditions, such as recessions?
> A) Yes, but it does depend on a few things, so “No” as a blanket statement.
The question is silly, because of course it might be linked to economic conditions. That’s a given, in many cases, but certainly not always. I meet the CC Use Q) but never pay Interest. I use it for Personal Savings on my Personal trips.
> Q) You think credit card (use) “Interest Rates” might be linked to economic conditions, such as recessions?
>> A) Most Definitely, and in Most Cases
The data, like in most we see now days, is so skewed it’s close to unusable IMO. My data tracks for some stats, but is entirely skewed when taken out of complete context. Usable in some cases for “Data Points”
What we do know however, is that people using CC’s, and paying “only” the minimum due, are or will be in trouble soon enough. It’s a viscous cycle to get free from, because it self perpetuates, with only going above and beyond the requirement, with strict discipline, can you hope to avoid getting trapped in it from time to time.
As my professor told the personal finance class, the only thing that one should pay “on time” was a house.
NOT even that. mom and dad saved and built the house i grew up in. they were in early 40s. i’ve owned plenty of houses as an occupant and r/e investor for profit. one doesn’t need debt on houses. if one can delay gratification until one can actually pay with currency and no debt. but to each her own. the only way to own r/e imho is 100% LTV or 100% outright. go study why that works in bank runs and foreclosure panics in world history
When was it that they were able to save and build their own home? Did they actually built it (ie do some/all of the work) or do you mean they just had a custom built home after saving the cash to pay for it?
Did they do this in a large city or in some small town in the middle of nowhere (it makes a difference).
It’s not the 1970s and 80s anymore (or even earlier times). The number of people able to actually save and pay for their 1st house ‘in cash’ has to be WAY under 1% of the population (I bet it’s .1% or less) and that’s not changing anytime soon.
Finally, saving for an all cash payment is a very poor ROI on your money. The reason should be obvious. If you put 20% down on a home and finance 80%, if the home value rises by 20%, you double your initial investment money because of leverage. If instead you had not bought but were trying to pay in cash, you’d need 100% investment return just to keep up with the 20% house appreciation.
Mish, I added the two lower numbers= 10% because they are so stupid that they do not know or PURPOSELY HIDING the fact that they are ALL TEETERING into Bankruptcy and then combine next higher number (actually are TEETERING)… and we have nearly everyone over their limits and… I am assuming that these types of consumers ACTUALLY USE CC CREDIT to pay bills (and they likely DO) and we are going to see a huge splash of anger, coming right up!
But wait, Harris has a plan. Combine student loans and credit card debt and finance it with a 20-year Fed. bond issue at 5%. See how easy that is?
They should be forgiven that way the libtards stay in power until the eventual economic collapse caused by both parties
EASY PEASY! LOL to you and hmk….we are so screwed!
A bit off topic, but hopefully interesting. A much older cousin, a boyhood chum whom I still keep in touch with occasionally, was what could be called chronically unemployed. He’d get a job, get fired, and then collect unemployment. His 30’s-40’s were quite rocky from a career perspective. He has had stretches of being unemployed for as long as two years, in fact.
Needless to say, his lack of stability was of concern to my aunt and uncle. My aunt actually opened a smal account in his name to pay for his funeral, believing that he would lack the funds.
I caught up with him recently at a family function. He is retired, not yet taking SS in order to max out his payment at 70, and said he has a net worth that was somehwere between the top 1-2% wealth percentile in the US.
I told him BS, and he proved it to me by showing me his investment account data over dinner the following day. I shit you not, $6 million+ in stocks and bonds, not counting his $1 million paid off home. I was astounded, and asked him how he did it, and could he give me some advice on strategies for increasing my personal wealth.
He admitted that he had a difficult time “working for idiots” and that he had met a mentor who told him how to start and sell companies. When a company was acquired, he would go along for the ride at a very nice salary to help in the transition. Did this a few times and turned his life around.
I made him pay for dinner, and thanked him for his advice. I was quite surprised to see him doing so well, and quite happy for him. He was always a decent sort, a bit of a hippy, I guess you could say, although with a college degree and a masters degree. Just marched to a different drummer.
What kind of goods and or services were produced by the companies that he started and sold?
He started and sold companies in the biotech space, as I understand it.
What exactly was Donald Trump going to do about inflation again? Oh yeah, remove social security taxes and put massive tariffs on foreign products! That’ll solve the problem!
The more important question is what would word salad do to make it worse, and I imagine her puppeteer handlers have lots of ideas.
Ryan and John: you are BOTH on to the question at hand: NEITHER of these pretenders have any IDEA what to do about anything!
THIS ☝️ ☝️ ☝️ 💯
See my Comment below.
y = e to the x power
Every time
True but if you think about it why should ss be taxed on the money you put in
In the last 3Y, since 2021, peoples bought 8/10 million less houses (transactions are dead) and 8/10 million less brand new cars (chips shortages). When the intermittent fasting will be over prices will decline in real terms and transactions will rise, feeding the beasts.
Credit cards debt reached $1.14T. Utilization : 21.3%. Available credit : $5T. Bank’s
profit 25% x $1.14T ==> $250B from c/c. The banks know your sources of income, your balances, how much u spend and on what.
There is a different between maxing out $500 available or $5,000. Most zoomers are tested by the credit cards co. They risk little, charging 30% from the day u spent. If u pay they increase available from $500 to $1,000 or so, but the 30% interest stays.
They can’t make money on $500 available credit, but sometimes maxing $3,000, or $5,000, with an unusual expense is good for the banks, feed the beasts.
Well right now lots of ‘realtors’ are getting lesson in real life
the DOJ settlement with them is real piece of S
market is on life support
The stock brokerage industry went into a downward spiral after the SEC mandated negotiated stock commission rates in 1975. In less than 50 years, they went all the way down to zero.
The gov’t/federal reserve still holds two thousand billion dollars worth of mortgage backed securities that were *bought* with printed money, which pushed down mortgage rates to cheap debt lows enabling the house hoarding speculative bubble, and now people are on buyers strike because of the bubble prices the Republicans and Democrats and their greedy foolish corporate donors caused. Good news is the mbs are decreasing and should go down to zero. If people dont like policies that mess up the housing market they should vote Libertarian, the only party on the ballot that says they will cut spending, pay down debt, and stop manipulating interest rates.
Absent further essential context, this is a bullshit “innuendo-based” study.
What’s the normal pre-covid rate, percentage or whatever level of credit cards being highly used?
For all we know (based on the published report), “ 37 Percent Have Maxed Out a Credit Card or Nearly So ” is entirely normal behavior!
In the post-COVID inflationary environment, costs of everything are up 20-50% and most people’s earnings are up as well. Even savers are getting interest payouts. Did Credit Linits rise in sync? Of course not! So of course what happens is people end up closer to their credit limits and then belatedly ask for limit increases. I did this and my credit is essentially perfect. I’m sure millions s of others did too.
Without knowledge of (a) historical max-out rates and (b) current vs historical credit limits relative to income, there’s no way to know whether “37 percent almost maxed out” is normal or not…
True. Without historical comparison this data is kind of meaningless. Also note that the 37% is not as of now but at some point in the past few years.
I have to admit in 2024 I’ve come close to maxing out my cc
had to ask for increase
of course I’m a deadbeat and cc industry hates us(about 1/3)
we don’t pay interest and payoff our cc every month like clockwork
Does it mean that before credit cards:
a. more than 50% of population would have starved?
b. 100% of population had to learn math and financial management – on their own?
c. inflation is too high?
Actually, without the advent of credit cards, I believe inflation would have been significantly lower. Credit quite naturally allows for the increase in the cost of goods.
Why should I give a cr@p about people who can’t manage their money or available financial resources? Let them become homeless or starve. I really don’t care.
You might care when they come looking for something to eat
Brainz…
They don’t care about you. we are always told to care about people who makes bad decisions, but they only care for themselves. You are not unusual or wrong in your statement.
Timely post. Amex stock was down 7% before it closed 3% lower.
https://www.cnbc.com/video/2024/10/18/ubs-erika-najarian-on-amex-q3-results-seeing-some-consumer-spend-trends-decelerate.html
Been spending the day liquidating some stocks in my portfolio. I think we’re finally going to get that long waited correction in ’25 or sooner. Still holding puts on SPY for added insurance.
Moving to cash until after the election but holding some oil stocks. If trump wins that’s a guaranteed stock market crash at some point over the next 4 years.
The money train is about to get derailed, buckle your seat belts.
The end-game is bankruptcy and debt repudiation. People don’t understand the math, the Federal Deficit is now vulnerable to a reissuance of a new currency.
With the interest expense now the largest component of the deficit, the burden has now become exponential.
we are for sure looking down the barrel of going back to the future. states and banks, will issue their own USD>. change the the legal tender laws and it’s wide open back to the future……..
There will come a time (unpredictable) when it will be impossible for the government (federal) to collect enough in taxes to pay all of its expenses, including interest on the national debt. The Gov’t can of course borrow an indefinite amount through the Fed. (concealed green backing) given a few changes in existing law. But that would lead to hyper inflation – i.e., a collapse in the credit of the Gov’t.
So the easy way, is the way the French did it in 1960. Simply say that beginning Jan 1 (or any other date), new dollars will be issued, and that each new dollar is worth 100 old dollars. Then follow that up with a largely state controlled economy.
In 1960, the French economist / mathematician Jacques Rueff, during Charles de Gaulle’s presidency, converted the old franc, to a nouveau franc, equal to 100 of the old franc. However, even with this substitution, inflation continued to erode the currency’s value, though at lower rates of change, in comparison to other countries. And this new franc equaled 20 cents to a U.S. dollar. The old rate was 5.00 to a dollar.
In 1960, the French franc, which was one of the weakest currencies, overnight, became one of the strongest. Correcting policies included plans to 1) balance the budget, 2) stabilize the currency, and 3) eliminate currency controls.
The gold content of the franc increased 100%, & 1) foreign exchange rates, and 2) France’s internal prices, reflected the conversion overnight. Internally, prices dropped about 90 per cent, and the foreign exchange value rose from about 0.238 cents per franc, to about 20.389 cents per franc.
Domestically, France was on a managed paper standard; externally, on a modified gold bullion standard. With the new policies, France’s economy strengthened, and the franc became fully convertible @ approximately its gold par, into gold for foreign exchange and into foreign currencies.
With the introduction of the Euro, the franc in Jan. 1, 1999, was worth less than 1/8 of its Jan. 1, 1960 value.
Re “ There will come a time (unpredictable) when it will be impossible for the government (federal) to collect enough in taxes to pay all of its expenses, including interest on the national debt”
It’s not “unpredictable” because it has already happened. The U.S. Gov’t hasn’t paid all expenses out of taxes for many years. Although it might mathematically be possible, there is not the political will to find out.
But economists argue that there is a shortage of safe assets?
And finding out the consequences of filing bankruptcy.
Quote from above: “average credit card utilization rate was 21.3 percent in August, in line with a historic norm since 2011 of 20-22 percent and below the 30 percent rule-of-thumb that experts typically recommend”
What kind of idiot experts are these? My expert recommendation is “zero percent,” i.e. pay your full balance off every month. If you find that you cannot pay it all off one month then stop all purchases that are not absolutely necessary until you get it back to zero.
The 20-30% is the typical statement balance before you autopay it in full.
Mnkypox shitting his pants at these polls
Aldi instant coffee for the win.
Caffeine pills at almost any store. Typically $2.99 for a box.
Health benefits of coffee (6 mins)
https://www.youtube.com/watch?v=hDi9ffMwTVg
I recall similar advertising for tobacco in decades past. [lol]
They even had MD’s recommending smoking!
It does concern me. I’ve seen stats that say, relative to the money supply, the record consumer debt is not quite a record (but quite high). But the increase seems to impact those who can afford it least. In light of this, Kamala asking if republicans have any compassion does seem a bit … interesting.