A recent report on the second quarter issued by the Federal Reserve Bank is creating some concern among economists. The data released on August 15 reveals that in the wake of a strong economy and lower interest rates, credit card delinquencies continue to grow.
For the first time since the 2009 financial crisis, the economy saw a year-over-year rise in debtors falling behind on credit card payments. That rise in delinquencies is running concurrent with an increase in overall household debts.
Household debt grew to $12.84 trillion, an increase of $114 billion, breaking the record set in the first quarter of 2017. Mortgage debt now totals $8.69 trillion (an increase of $329 billion in 2016), auto loans account for $1.19 (up $87 billion since last year) and student loans stand at $1.34 trillion (a rise of $85 billion from the previous year).
The New York Fed clarified that current household debt setting records is not all bad. While levels approached $13 million in 2008, questionable mortgage debt that led to the crash is not a factor.
However, the increase in the number of lower-credit borrowers late in their payments for more than 90 days is something to watch. An economy that is continuing to recover and add jobs should not see those levels of delinquencies.
Newly delinquent credit card debt is at 4.4% in the second quarter of 2017, an increase of about 3.5% from the second quarter of 2016. While rates in the peak of the recession ranged between 8% and nearly 11%, the increase represents a troubling trend.