Credit card losses in the U.S. are rising at the fastest pace since the Great Financial Crisis of 2008.
Goldman Sachs reportedly predicts that credit card losses will continue to climb through the end of 2024 or early 2025 for most issuers. This is unusual because the losses are accelerating outside of an economic downturn.
Unusual trend
The main factors behind this trend are higher interest rates from the Federal Reserve and a surge in spending since the pandemic.
U.S. citizens owe more than $1 trillion on credit cards, a record high, according to the Federal Reserve Bank of New York. Credit card defaults, which occur when a borrower fails to repay debt and the lender writes it off, are also projected to increase by 20% year-over-year in 2023.
This could have negative implications for the economy and consumers’ financial well-being.
Debt is building.