https://www.wsj.com/personal-finance/credit/us-credit-card-debt-af5c7c77?mod=hp_lead_pos2
Americans Are Falling Behind on Their $1.25 Trillion Credit-Card Bill
Soaring interest rates and stubborn inflation have led to highest delinquencies since the financial crisis; ‘a pattern of survival debt’
By Dan Frosch, The Wall Street Journal, May 28, 2026
…
In the first quarter of this year, the percentage of credit-card balances that were at least 90 days delinquent rose to 13.12%, according to data released in May by the Federal Reserve Bank of New York. That’s the highest level in 15 years, and the most since the period following the 2008 financial crisis.
America’s total credit-card balance stood at $1.25 trillion in the first quarter, according to the New York Fed, up from $1.18 trillion in that quarter last year. That’s the highest first-quarter balance since the New York Fed began recording the measurement in 1999. …
Average interest rates on cards rose to 21% in February 2026, from 14.6% in February 2022, according to a survey of credit-card issuing banks by the Federal Reserve. …
“When food, housing and healthcare is all more expensive, there is less money to pay off your credit card,” Braga said. “So more people are faced with decisions. They don’t want to lose their house or their cars. They need to pay their utility bills. They’re more likely to stop paying their credit cards first.” … [end quote]
Consumer Debt Service Payments as a Percent of Disposable Personal Income has risen sharply since 1Q2021. It was 5.4% in 4Q2025 but still below the pre-pandemic level. This doesn’t include mortgage debt.
Inflation in “survival” necessities in 1Q2026 isn’t in the data yet but it’s higher than before. This shows in the difference between the CPI and the “core CPI” which excludes food and fuel (as if any household can live without food and fuel).
Unsurprisingly, low-income debtors are more likely to be delinquent. Eventually, their credit will be cut off. A significant percentage of the American consumer base will simultaneously stop buying discretionary goods, forcing a sharp contraction in mainstream retail, services, and corporate earnings. This doesn’t threaten the lenders, which expect and price in delinquencies. But it can reduce economic activity generated by the lower-income customers.
The University of Michigan’s Consumer Sentiment Index plunged to a record low of 44.8 in May 2026, revised down from a preliminary 48.2 and marking the third straight monthly decline. Consumer confidence is lower now than it was in 2020 during the Covid pandemic or 2022 when inflation spiked.
Critically, consumers grew increasingly worried that inflation would spread beyond fuel prices in the long term. Year-ahead inflation expectations edged up to 4.8% from 4.7%, while long-run expectations climbed to 3.9% from 3.5%.
Historically, the University of Michigan index is a highly reliable leading indicator.
Worried consumers at all income levels spend less as they batten down the hatches. The spending pullback causes companies to lay off workers. Layoffs in retail, logistics, and service sectors will disproportionately target the exact lower-income demographic currently utilizing “survival debt.”
When the bottom 40% run out of room on credit lines, they cannot spend. This is classic recessionary dynamics.
Wendy
Wendy