Credit Meltdown 2024: Credit Card Debt Surge Sparks Wealth Transfer Panic!

#economy #business #finance
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Currently, credit card delinquencies in the United States have reached levels comparable to those seen in 2008, as per a recent Federal Reserve survey. Notably, total credit card debt in the country has surpassed $1 trillion for the first time, marking a significant milestone. The rates of credit card delinquencies have exceeded pre-pandemic levels, a trend worth considering in light of prior assurances of a "soft landing" by economic figures such as Janet Yellen in 2007 and Jerome Powell more recently.

What's particularly noteworthy is that one in five Americans is utilizing "buy now pay later" options to finance everyday expenses, including groceries. This means that a substantial portion of the population is resorting to installment loans for items like bread, steak, eggs, milk, and chicken. This raises questions about the overall health of the economy and whether we may be heading towards a potential financial challenge.

Looking ahead, there is a prediction of a significant wealth transfer in the coming years, with many Americans possibly compelled to liquidate assets, such as homes and cars, or even close down businesses. The changing economic landscape is expected to create opportunities for some individuals to amass wealth, while others may face challenges due to a lack of awareness of the evolving circumstances.

Examining the economic landscape, household debt is currently at an all-time high, reminiscent of the 2008 financial crisis. This includes not only credit cards but also auto loan defaults. Although there is presently substantial equity in homes, the dynamics may shift as economic conditions change. The potential for more layoffs and economic shifts could lead to a scenario where many Americans find themselves in the position of selling off their homes.
The significant question arising is how many Americans can afford to buy homes when the cost is 60% higher than renting. In such a scenario, it becomes a race to find buyers, especially if there are more sellers than buyers. As the imbalance grows, buyers gain increased control over the market, leading to what seems like an imminent affordability crisis. Both home buyers and sellers are contributing to this, with sellers holding perceived equity that might not materialize when cashing in.

Adding to the economic concerns, credit card delinquency rates have surged to a decade high. Approximately 40% of Americans have missed their student loan payments, totaling around 9 million individuals. Tracking these issues since January 2nd, when late payments started accumulating, indicates a potential rise in delinquencies. With the ongoing holiday season, where people tend to spend more, there is a possibility that more individuals will fall behind on bills.

Examining credit card balances, which reached $1 trillion for the first time this year, the share of credit card debt falling behind has climbed from 6.5% in the first quarter of 2023 to 8% in the third quarter. This 8% rate is the highest in more than a decade. Looking specifically at subprime borrowers, credit card delinquencies are expected to climb to 9.2% in the first half of 2023, approaching the default rate of payday loans, which is considered riskier for lenders. Predicting a decrease to 9% by the end of the year is contingent on a significant improvement in the job market, which may face challenges given the looming refinancing of a trillion dollars in corporate debt and the potential for a tougher job market compared to recent years.

[distructzero]

Daughters friend works at Starbucks. I hear the daily stories of customers at pickup window fumbling thru credit cards after the 1st and /or 2nd ones were declined. When they do get a card that works they then pay for the order that's in line behind them as well as their own.
Meanwhile the drive thru line is wrapped around the building.
I can take a 3rd of the people in that drive thru line and I probably have twice the income...and I'd never waste 10min of wasted fuel in engine idle time let alone then paying $7 or a coffee with a logo on the cup. Until people address this type of behavior and stop spending on garbage they don't need the financial issues won't change.

[tmm]

The occupants of this country will get what's coming to them, misery..😢

[rhondashuman]

This problem started many years ago. When the economy was very rated triple AAA society thought they were wealthy they promoted credit cards to fund the banks. The consumer was so unaware. 🔥

[Rustycarr]

Biggest cost for families is food it costs a lot of money to keep overweight people in junk food. What percentage of western society people overweight? %90. Junk food costs, groceries mainly, is the elephant in the room! Excuse the elephant pun.

[TheBodrey]

The Fed should not have loaned money to any banks. There shouldn't be any more bailouts like there was during the GFC. Banks should be allowed to fail like any other business that makes bad decisions. Market forces should dictate who survives and who does not, WITHOUT government intervention of any kind.

[glizbpr]

Awareness buys time, time buys options. Stay awake, aware, and prepared. The clueless (so many) may soon run out of both time & options.

[harryholiday]

what ever happened to the consumer paying in

[divorceesquire]

It’s a house of cards…charging interest is the culprit when there isn’t enough money supply to repay it.

[barsixful]

Even if interest rates stall then slowly go down a lot of people won’t be able to hang on. Big companies are making huge profits and general living expenses will NEVER GO DOWN….so cost of living will continue to climb. A RESET in housing market is guaranteed

[raywest]

Basic management of credit and personal finances SHOULD BE TAUGHT IN SCHOOL. Ever use algebra? Me neither, but every person on the planet uses money.

[dickritchie]

The thing to do is get a puppy. Support your local ASPCA/shelter/rescue!