The paycheck-to-paycheck economy is experiencing more strain as consumers increasingly make only minimum payments on their credit cards, leading to a rise in debt. Delinquencies are also on the rise, with accounts 30-plus days and 60-plus days past due reaching an 11-year high, according to fourth-quarter 2023 data from the Federal Reserve Bank of Philadelphia. Despite a slight increase in full balance payments, the majority of accounts are making only minimum payments, reflecting the challenges of managing escalating debt.
PYMNTS Intelligence data suggests that 57% of credit cards are owned by paycheck-to-paycheck consumers, whose payment trends foreshadow broader credit trends. With inflation persisting, more consumers are leaning on credit cards, driving up card utilization and leading to an increase in revolving credit balances. Younger consumers, particularly Generation X, are feeling the financial strain, with a significant percentage revolving their credit and reaching their credit limits in the past year.
Heading into the end of the year, a growing number of consumers are turning to credit products to manage their finances, with a notable percentage using credit cards for unexpected and emergency expenses. Despite data from December being three months old, recent reports indicate a continued rise in consumer debt, signaling potential financial instability on the horizon as the tightrope of managing debt and expenses becomes increasingly precarious.
