The percentage of loan companies have forgone collecting, also called charge-off rate, is up 3.82% in the first quarter of 2019, signaling that bad loans are rising to its highest level in nearly seven years, a new report by Bloomberg Intelligence found.
One of America’s financial leading companies and its third largest card issuer — Capital One Financial Corp — noticed a “degradation” in some customers’ credit quality. Richard Fairbank, the company’s CEO, said some cardholders with negative credit history during the last decade’s financial crisis are now witnessing those problems vanish from the reports of their credit bureaus.
Fairbank said the market might be seeing data that might not show the full picture of the credit history of a customer.
Another study, this time by WalletHub, shows the average American household has an alarming $8,284 credit card debt. Even though credit card debt is one of the most costly ways to borrow money, this figure shows that Americans are relying more and more on this kind of financial service.
Even more disturbing than this enormous figure is this study also reveals many Americans have a hard time managing their credit card debt. The research suggests that the average household is only $177 away from having a credit card debt burden that would be unsustainable relative to income. This fact would mean they are living at the outermost boundary of their financial means.
The rise in credit card debt comes at a time when the country is enjoying an economic surge, with a 3.5% rise in real GDP, according to the third quarter of 2018 estimates published by the Bureau of Economic Analysis.
According to experts, one reason for the ballooning credit card debt is more consumers have access to credit cards, with 171 million customers issued to customers at the end of the first quarter of 2017. Another probable cause is despite the booming economy, the average wage in the U.S. has approximately the same purchasing power it had 40 years ago.