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Strong Economy Yet Rising Credit Card Woes: Why Are Americans Struggling?

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The economy's strong. Why are more Americans barely making credit card payments?

The financial health of many Americans is deteriorating, as reported by the Philadelphia Federal Reserve.

There has been a significant increase in the number of credit card users only paying the minimum due on their accounts, reaching a 12-year peak of 10.75% between July and September 2024, according to data collected from the nation’s major banks, the Philadelphia Fed revealed on Wednesday. Concurrently, both the size of credit card balances and the proportion of those overdue are on the rise.

Although general economic indicators suggest that consumer spending remains robust, these specific findings tell a more troubling story.

“The trends we’re seeing in credit card usage are early indicators of financial strain among consumers,” noted Andrew Kish, Assistant Vice President in the Financial Monitoring Group at the Philly Fed. “An increasing number of people are struggling to meet their credit payments… We will continue to closely observe these metrics over the next few quarters to assess consumer financial health,” he added.

Exploring the Discrepancies in Economic Data

Aggregate economic data often combines the experiences of all consumers, potentially obscuring the distinct challenges faced by different income groups, according to economists.

“It’s disheartening to realize that the financial woes of lower-income groups are often masked by the spending power of the upper-income brackets,” economists at Wells Fargo reported earlier this month. They noted that high-income consumers help to sustain overall consumer expenditure levels above 2% annually, which might give the impression of business as usual, despite significant undercurrents of distress among a substantial portion of the populace.

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For those in lower income brackets, reliance on credit has increased while savings rates have declined, they explained.

Early in 2022, savings rates among lower and middle-income families turned negative, as they began using up their emergency funds, a trend that lasted for nearly two years, according to Wells Fargo. Although savings are now back in the positive territory, they remain below the levels seen before the pandemic.

“What might look like robust spending is actually a sign of financial vulnerability for the working poor,” they added.

The Real Impact on Average Americans

A survey of 1,065 workers conducted in December revealed that 73% are barely able to cover more than their basic living costs, and about one-third have incurred debt to manage these expenses, per the 2025 Wage Reality Report by Resume Now.

On average, households with revolving credit card debt carry a balance of $10,563, according to a NerdWallet survey of 2,000 adults.

“The burden of this debt is more severe today due to higher interest rates, leaving many households struggling just to keep up with their current debts,” stated economists from Wells Fargo.

From July to September 2024, revolving credit balances hit $645 billion, marking a 52.5% increase from a decade low of $423 billion in mid-2021, revealed by Philadelphia Fed data. The total card balances escalated to $914 billion, the highest since the Philadelphia Fed started tracking this data in 2012.

“Not only are consumers spending more, which leads to higher balances, but they are also paying off less, thus increasing the amounts revolving,” the Philadelphia Fed report indicated.

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Credit card delinquencies of 30+ days also climbed to 3.52% during the same period, more than doubling the low delinquency rate of 1.57% recorded from April to June 2021, according to the Philadelphia Fed.

Strategies for Americans to Overcome Credit Card Debt

Eliminating credit card debt is challenging, as evidenced by the experiences of several Americans followed by USA Today over the past year. However, experts suggest a few strategies to manage debt:

  • Whenever possible, make payments above the minimum on credit card balances to avoid prolonged debt and excessive interest payments.

For instance, TransUnion reports that the average credit card balance stands at $6,380. If you were to pay just the minimum at an interest rate of 20.27%, it would take 218 months (over 18 years) to clear the debt, accumulating $9,344 in interest.

  • Consider applying for a balance transfer card that offers a 0% interest period. “Paying about $300 monthly could clear the average credit card balance in 21 months without accruing any interest,” suggested Ted Rossman, a senior industry analyst at Bankrate.
  • For those with lower credit scores or debts exceeding $5,000, consulting with a credible nonprofit credit counseling agency like Money Management International might be beneficial. A counselor can help devise a payment strategy and budget to keep finances on track, Rossman advised.

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