Tens Of Millions Of Americans Are “Trapped” In An Endless Cycle Of Debt That Is Sucking The Life Out Of Them Financially

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by Michael Snyder, The Economic Collapse Blog:

Did you know that U.S. households are 17,690,000,000,000 dollars in debt?  Of course household debt is only one part of a much larger story.  The federal government is 34 trillion dollars in debt, state and local governments are absolutely drowning in debt and unfunded liabilities, and corporate debt is at an all-time high.  As a society, we are on the greatest debt binge in the history of the world, and it just gets worse every single year.  Previous generations handed us an economy that provided us with an incredibly high standard of living, but we always had to have more.  So we have been borrowing and spending with no end in sight, and now our day of reckoning is fast approaching.

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According to the New York Fed, U.S. household debt surged to another record high during the first quarter of this year…

In the first three months of 2024, total household debt surged to a fresh record of $17.69 trillion, an increase of $184 billion, or 1.1% from the previous quarter. The increase mostly stemmed from a jump in mortgage balances, which rose $190 billion from the previous quarter to $12.44 trillion at the end of March.

If we could handle all that debt, there wouldn’t be much cause for alarm.

Unfortunately, delinquency rates are rising.

In fact, the proportion of credit card balances in serious delinquency has risen to the highest level since 2012

A growing number of Americans are falling behind on their monthly credit card payments as they continue to battle high inflation and interest rates, according to New York Federal Reserve data published Tuesday.

Credit card delinquencies, which have already surpassed their pre-pandemic levels, continued to rise in the three-month period from January to March.

The flow of credit card debt moving into delinquency hit 8.9% in the first quarter at an annualized rate, compared with an 8.5% rate the previous quarter and 5.87% at the end of 2023. In fact, the percentage of credit card balances in serious delinquency climbed to its highest level since 2012.

In 2012, we were just coming out of the Great Recession.

Now a new economic crisis has begun, and millions of U.S. households are teetering on the brink of financial disaster.

If you use credit cards, it is so important to pay them off in full every month.

Unfortunately, approximately 44 percent of all cardholders do not do that…

Overall credit card balances totaled $1.115 trillion in the first quarter of the year, $129 billion more than last year. For card users who pay their balance in full every month, that’s not a problem. But according to Bankrate, roughly 44% of borrowers carry credit card debt over from month to month.

It has always been financial suicide to carry credit card balances from month to month, and that is especially true today because interest rates are so ridiculously high

The rise in credit card usage and debt is particularly concerning because interest rates are astronomically high. The average credit card annual percentage rate, or APR, hit a new record of 20.72% last week, according to a Bankrate database that dates to 1985. The previous record was 19% in July 1991.

If people are carrying debt to compensate for steeper prices, they could end up paying more for items in the long run. For instance, if you owe $5,000 in debt, which Americans do on average, current APR levels would mean it would take about 279 months and $8,124 in interest to pay off the debt making the minimum payments.

I always encourage my readers to pay off high interest debt as soon as possible.

If you have credit card debt, eliminating it should be your number one financial goal.

Sadly, the New York Fed’s new report tells us that an increasing number of Americans are getting behind on their credit cards and their auto loans

The Fed’s report showed 6.9% of credit card debt transitioned to serious delinquency last quarter, up from 4.6% a year ago. And for credit card holders aged 18–29, 9.9% of balances were in serious delinquency.

Auto loan delinquencies are also higher as the average monthly car payment jumped to $738 in 2023. Close to 2.8% of auto loans are now 90 or more days delinquent — that equates to more than 3 million cars. Auto loans are the second-largest debt category following mortgage debt, with $1.62 trillion outstanding.

Tens of millions of U.S. households have severely overextended themselves financially.

When you get to a point where you are so far in debt that you can barely make the minimum payments, it can feel like you are “trapped” with no way out…

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