About 68% of the American GDP is based on consumption. So, studying the American consumer is critical to get a grip on U.S. economy. The best way to get a handle on the american consumer is to study how they are doing on their credit cards. Here, we compile various important data points that help us understand the financial health of the American consumer.
Growth in Credit Card Debt
After a steep fall during Covid, the credit card debt has been growing at a rapid pace. As of March 06, 2024, the credit card debt stands at $1048.3 Billions.
The credit card and revolving debt grew at 9.7% annualized rate in the last 4 weeks. Just as a reference, in the pre-covid period, it grew at ~5% annually. During the 2008 crisis, the credit card debt grew at 10-20% rate from Oct 2008 and Jun 2009.
Interest Rate on Credit Card Plans
The interest rates on credit card plans are around 21.47%. These rates ranged between 12%-14% during most part of the last decade.
Delinquency Rates on Credit Cards
The most important metric that shows the health on consumer is the deliquency and charge-off rates on credit cards. As on December 31, 2023, Credit card delinquencies increased to 3.1% rate. At the same time, charge-offs on credit cards grew to 4.24% rate.
Consumer's Ability to Pay Debt
The Consumer Debt Service Ratio is a good way to understand if the consumer is struggling to make the debt payments or is able to make them easily. This ratio measures the percentage of disposable income that goes to make the credit card payments.
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