It’s a recipe for economic disaster that consumers are whipping up, according to recently released reports. They are charging more money on their credit cards and fewer people are paying the balances off in full every month. While this likely means more accounts and work for companies in the accounts receivable management industry, the question is whether consumers will have the money to pay when those calls come in.
On average, consumers were carrying $5,474 on their credit cards last year, which is 13% higher than in 2021. Remember back a few years ago, when the pandemic started and everyone was making payments on their debts and getting their financial houses in order? Those days may be over.
At the same time, the number of consumers who are carrying balances on their credit cards every month is up to 46%, from 39% a year ago. Even among those making at least $100,000 a year, 37% of them are not paying their card balances in full every month.
And people don’t even know how much not paying their balances off is costing them. A survey conducted by Bankrate.com revealed that 40% of consumers don’t know what the interest rates are on their credit cards.
There were 511 million credit cards in circulation last year, up from 442 million in 2019.
The delinquency rate on credit cards was 1.94% last year, up from 1.13% a year ago.
While inflation may be slowing, wages have not risen fast enough to keep up. That means consumers will continue to rely on credit to help make ends meet. That means more pressure on collection agencies to get creative when working with consumers to get debts paid.