The pressures of increased debt burdens are put in stark relief with the latest data from the central bank.
And the burden is felt keenly among younger consumers, and lower-income households — which means the pinch is keenly felt within the paycheck-to-paycheck economy.
To that end, the Federal Reserve Bank of New York’s Center for Microeconomic Data noted in its quarterly report on household debt and credit that credit card balances increased by $50 billion to $1.13 trillion. Auto loan balances rose by $12 billion to end 2023 at $1.61 trillion, per the report released Tuesday (Feb. 6).
The Fed noted that on an annualized basis, about 8.5% of credit card balances and 7.7% of auto loans have transitioned into delinquency status. “Serious credit card delinquencies increased across all age groups, notably with younger borrowers surpassing pre-pandemic levels,” the Center said in a press release. As for the percentage of loans that have flowed into serious delinquency status, 6.4% of credit card data had earned that designation, at more than 90 days delinquent, up from 4% a year ago.
Data tabled released by the Fed show that 9.6% of card debt held by borrowers between 18 and 29 years of age were past due by 90 days or more, up from 7.6% last year. For borrowers 30 to 39 years old, the respective 90-plus-day delinquency rates were a respective 8.7% at the fourth quarter of last year and 5.7% a year ago.
The report found 4.8% of auto loans were in serious delinquencies for consumers 18 to 29 years old, up from 4.3% last year. For consumers between the ages of 30 and 39, the delinquencies 90-plus-days past due grew from under 3% at the end of 2022 to a recent 3.6%.
The Paycheck-to-Paycheck Impact
The Fed’s data come as PYMNTS Intelligence has reported that 42% of paycheck-to-paycheck consumers expect the interest rates of their loans to increase during 2024. And about 20% of consumers see some negative impact to their savings accounts ahead, as cash cushions dwindle at least a bit. It would be hard to state that individuals and households are sanguine about what lies ahead. A minority of consumers, at 4 in 10 individuals surveyed, say they are optimistic about their future personal financial situations, unchanged from December 2022.
Any increases in paychecks would be no panacea, as less than 40% of consumers foresee a “real” boost to their earnings this year. That means that a majority of consumers anticipate that inflation will in fact eat away at the purchasing power of their take-home pay. More than a third of respondents said their wages increased last year at a pace lagging inflation, and 38% said they’d gotten pay raises on par with inflation, which gives a sense of the headwinds blunting any real momentum in purchasing power.
Among millennials, 48% expect a real increase in their earnings in 2024, down from 61% last year. Gen Z consumers mirror those expectations, with 46% expecting a real increase in their earnings in 2024, a drop from 54% in 2023. We note that these are the age groups that are finding the most difficulty in meeting the burdens of their card obligations, as measured in the delinquency rates just published by the Federal Reserve.