Americans are increasingly struggling with credit card debt and other loansmega swerte, and consumers are paying more for basic banking services like A.T.M. withdrawals, recent financial research finds.
Interest and fees on credit card accounts carrying balances rose about 25 percent in 2023 from the year before, according to a report published this month by the Financial Health Network, a nonprofit focused on financial stability. And 42 percent of households carrying balances on credit cards reported that their overall debt level was “unmanageable,” up from 38 percent in 2022, the network found.
“The uptick raises warning signs in our minds,” said Hannah Gdalman, the nonprofit’s manager of financial services solutions. More borrowers have been falling behind on credit card payments, especially those who have maxed out spending on their cards, according to the Federal Reserve Bank of New York. The average rate on cards charging interest is nearly 23 percent, so balances can balloon quickly.
Making payments on credit cards as well as car loans, student loans and other installment loans has been increasingly challenging for consumers, the financial network found. People whom the network considers “financially vulnerable” — a classification of individuals who report that they struggle to pay bills on time, save for emergency expenses and manage debt — account for an outsize portion of the spending on interest and fees associated with credit products, the report found. (The analysis, which the network publishes annually, is based on public data and a nationally representative survey of consumers.)
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SKIP ADVERTISEMENTSeparately, the National Foundation for Credit Counseling, a nonprofit whose members help people manage credit card and other unsecured debt, warned of a rise in financial distress among consumers, based on data from its counseling centers. The foundation’s latest stress forecast, an index that aims to predict how likely people are to make their loan and credit card payments, had declined since the end of last year, suggesting people were feeling more confident about meeting their obligations, but it is projected to rise about 10 percent in the third quarter.
Bruce McClary, the foundation’s spokesmanmega swerte, said that while inflation had cooled, prices for some basic goods remained high, leading strapped consumers to turn to credit to meet their needs. “People still struggle,” he said.