The swift increase in credit card write-offs is occurring in an environment where consumers—particularly those with limited financial flexibility—are contending with elevated interest rates and higher living expenses, the report found.
“High-income households are fine, but the bottom third of U.S. consumers are tapped out,” Mark Zandi, the head of Moody’s Analytics, told the outlet. Researchers and analysts note that spending power among vulnerable borrowers has diminished as inflation continues to erode disposable income.
Mounting write-offs follow a period of strong consumer spending in the aftermath of pandemic-related shutdowns, when many Americans had boosted savings and lenders aggressively expanded credit card offers.
The Federal Reserve’s series of interest-rate increases, introduced to combat high inflation, has left borrowing costs at elevated levels.
For many Americans, this environment translates into a triple squeeze: pricier goods, higher credit costs, and diminished savings.
“Consumer spending power has been diminished,” Odysseas Papadimitriou, head of consumer credit research firm WalletHub, told the outlet.
He noted that since the beginning of this year, more borrowers have been missing their monthly payments by at least one billing cycle, signaling potential future losses for card issuers.
Consumers currently burdened by rotating balances may continue to face historically high finance charges for longer than anticipated. Economists caution that if inflation remains persistent, coupled with any rise in interest rates, households already struggling with credit card bills will be placed under additional pressure.
In the meantime, delinquency rates remain noticeably above pre-pandemic levels and signal continued strain.
“Delinquencies are pointing to more pain ahead,” said Papadimitriou.
