> Credit card delinquency rates, which are seen as a precursor to write-offs, peaked in July, according to data from Moody’s, but have only fallen slightly and remain nearly a percentage point higher than they were on average in the year before the pandemic.
This is a prime example of a style of reporting that really grinds my gears.
The citation is clearly to another internet source, so a link should be provided. If it truly cannot be linked because it is private, more context is still needed to understand what this data means.
I actually can’t find the source myself, but I can find “Delinquency Rate on Credit Card Loans, All Commercial Banks” from the Federal Reserve. [1]
The percents from that source somewhat match those referenced in the FT quote. “Peaked in July”
- 2024Q1 3.15%
- 2024Q2 3.24%
- 2024Q3 3.23%
Using 2019 as “the year before the pandemic”, the average was 2.5825. Is +0.6475 “nearly a percentage point”? I guess it technically would round up.
Seemingly important context that the quote doesn’t give is that 3.23% is lower than any time 1991Q3 to 2011Q4. But, maybe the trend matters more for this metric.
Here is another FRED chart that may be instructive, although I am not clear on the difference between "delinquency rate" and "balances past due" ("accounts past due" is different still)
Generally delinquent increase of any percentage is a big red flag as these accounts are statistically very unlikely to make a correction and are a bellwether for greater issues like sustainable future consumer trends. They also betray the real unemployment rate including the us "jobless" hand wavery.
hammock 20 days ago [-]
Not following. Did you click the link? FRED has "30 or More Days Past Due", "60 or More Days Past Due" and "90 or More Days Past Due." None of them align with delinquency rate
hattmall 20 days ago [-]
Its up to the CC companies to determine delinquency. Some may consider it at > 30 days, others may wait until 90 or 120 days.
pessimizer 20 days ago [-]
> Using 2019 as “the year before the pandemic”, the average was 2.5825. Is +0.6475 “nearly a percentage point”? I guess it technically would round up.
They're clearly not giving their references, calculations, or any basis for comparison, which is awful.
But there's no need to minimize what you've found in your own research, which is that that defaults are up ≈25%.
davidclark 20 days ago [-]
Yep! And, since I provided the basis for my commentary, you don’t have to trust my interpretation.
My focus was critiquing their phrasing, which turns that 25% into 38%.
Like I said, I’m not actually an expert on this to know if the trend is what matters.
20 days ago [-]
conductr 20 days ago [-]
> which is that that defaults are up ≈25%.
Thanks! I feel like this is actually the next reporting step that the source article needed to do. The original data source citation is helpful of course too.
But my feel is the FT author is trying to avoid just listing the numbers, so tries to cleverly explain them and unintentionally creates a meaningless statement. Instead, they should exercise a tiny bit of analysis and tell us on a relative basis the metric has changed since the premise is that it’s changed a lot, how does “higher level” even compare to what the readers can relate to or comparing to another time they where high or the previous record holder. In any case, if I read it’s 25% higher than 2019 I immediately can see how that would be concerning and drastic change and makes me want to read more.
The cynical part of me thinks it’s possibly just a way to increase word count and write with less numbers. But this is one of those cases when the author should use the data to create information for their audience to consume instead of describing the raw data (raw data nearly never needs description, if you’re tempted to do that, just cite/recite it directly). In short, information > raw data > convoluted descriptions of raw data.
webninja 20 days ago [-]
Comments like yours make the comment section invaluable. Upvoted.
Basically what you already said but a little better connection in how moodys probably reported on it.
19 days ago [-]
renewiltord 20 days ago [-]
This is likely a rewrite of something else by the human equivalent of an LLM. I wouldn’t ascribe much motive to it except “boss said I need to get out 20 of these out by 11 PM”
listenallyall 20 days ago [-]
Why did you skip over the meat of the article in the second paragraph (and a graph) to complain about something in the 14th?
Credit card lenders wrote off $46bn in seriously delinquent loan balances in the first nine months of 2024, up 50 per cent from the same period in the year prior and the highest level in 14 years, according to industry data collated by BankRegData.
> The citation is clearly to another internet source
How is "data from Moody's" (likely internal, unreleased, or subscriber-only) clearly an internet source?
davidclark 20 days ago [-]
Do you think the reporter at FT accessed this information on a paper report which was mailed to them?
If not, then it is on the internet somewhere. Whether it is on the “public” or “free” internet is different. If it is not freely available, then they could still give a real citation, so someone else with access to Moody’s private data could find it.
lazyasciiart 20 days ago [-]
Email is not "an internet source", and neither is my corporate sharepoint site.
davidclark 20 days ago [-]
“based on communications with Moody’s analysts”
“based on internal data from Moody’s”
“data from Moody’s” with no qualifier indicates the reader should be able to reasonably find the information themselves (which they can’t in this case)
listenallyall 20 days ago [-]
The general public expects to be able to find all of Moody's analysis and data? No. The "from Moody's" is the part that indicates this data is likely proprietary and inaccessible, as opposed to a government or university source like the Fed, or U.Mich consumer surveys.
davidclark 20 days ago [-]
This is a really nitpicky thread when in my top comment I allowed for the possibility of private sources:
> If it truly cannot be linked because it is private, more context is still needed to understand what this data means.
listenallyall 20 days ago [-]
Guess you skipped over the context provided in the preceding 13 paragraphs:
a sign that lower-income consumers’ financial health is waning
a closely watched measure of significant loan distress
but the bottom third of US consumers are tapped out
consumers’ personal finances are becoming increasingly stretched
Consumer spending power has been diminished
Americans who cannot pay off their credit card bills in full paying $170bn in interest
as a result, more of those borrowers are struggling to pay back their credit card debt
20 days ago [-]
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listenallyall 20 days ago [-]
Journalists (good ones) have sources. Perhaps he was provided the delinquency information via a phone call, or text, or at an invite-only presentation. It might be something Moody's will release publicly tomorrow, or next week/month, but this reporter got an early preview. There's a million reasons it wouldn't necessarily be on the internet right now.
1123581321 20 days ago [-]
It’s likely a mix of private service access, emailed reports, calls and chats if the reporter typically covers this beat.
mhh__ 20 days ago [-]
A lot of this data is quite hard to find if you don't have access to a data provider like Bloomberg (and costs money to quote) so I can understand why they don't bother, even though they should obviously.
davidclark 20 days ago [-]
Moody’s report could be aggregating the Fed data, but we’ll never know without a real citation.
listenallyall 20 days ago [-]
FT doesnt owe you a citation, or any explanation. It's a subscription newspaper, not a public resource. Just because someone linked to it on HN doesn't change that. If you feel that FT's reporting is insufficient, or unreliable, or lacks context, then go exercise a very simple remedy... don't read it. All your comments read as if FT owes you something, despite you not being the paper's target audience (or a paid subscriber).
infecto 20 days ago [-]
All of this data is public and well known for anyone in the finance industry, both professionals and reporters.
bdangubic 20 days ago [-]
you should follow a statement like this with some links mate :)
infecto 20 days ago [-]
Not your mate but the OP already posted links to Fred which is where it’s public. I am sure moodys used some internal data but Fred delinquency and late rates should get pretty darn close. This data (credit card related) is not unique but I can see it’s not entirely obvious for folks like yourself that are not familiar with it. ;)
bdangubic 20 days ago [-]
again - no links… :)
19 days ago [-]
patmorgan23 20 days ago [-]
Cool. For those who are not in the finance industry, could you provide us some links to this easily accessible data?
infecto 19 days ago [-]
The OP in this thread already posted the FRED link hence why I did not post anything and replied to someone who clearly did not see the links to the public data. Here is a follow up though that gets you closer
It kind of used to be. There was a level of responsibility despite the organizations being for-profit. But I just cannot pretend this is sufficiently true anymore.
bee_rider 20 days ago [-]
By for-profit do you mean ad supported or something?
I don’t really see any reason why journalism shouldn’t be for-profit. For example, a business model of producing informative articles and then selling access to those articles could be completely ethical, and a reasonable way to do journalism.
Ad supported media is just a toxic business model though.
ryanackley 20 days ago [-]
Hasn't ad supported media been the model for like 100 years or longer? The retail cost of print newspapers was to cover the cost of delivery and pay the retailers.
jasdi 20 days ago [-]
People who have issues with it, just don't get Broadcast (one to all) messaging has always been controlled by the ruling classes.
Freedom of Speech can be given to everyone very generously, if Broadcasting (distribution) is controlled.
During the hey days of newspapers without Postal subsidies/Railway subsidies and paper mill subsidies it was very expensive for publishers to ship tons of paper across the country everyday. Even today world wide lot of Govts run the Post Office and Railways. And they subsidize rates for newspapers and magazines. Good luck getting that subsidy if you piss off the wrong people.
Same story repeats with licenses for radio/tv/satellite spectrum. Today its just Ads or control of the content factory (see who owns all the loss making news orgs in the land - Corporations). Ad supported just means who ever can bid most for the ad. And the Elites can outbid the plebs every day of the week.
bee_rider 20 days ago [-]
I think there’s always been a mix? Anyway I’m, yeah, we didn’t invent being unethical at the turn of the millennium or anything like that.
kasey_junk 20 days ago [-]
What do you suppose journalism is and when do you propose that happened historically?
Waterluvian 20 days ago [-]
Stuff like Carreyrou’s investigation on Theranos feels like journalism. Where the objective is the truth, not ad impressions.
I think both goals can sometimes find harmony and the revenue can support the journalistic endeavour. But that feels less and less true. A lot of for-profit media is optimizing heavily towards clicks, often at the very clear expense of the story. Such as not linking citations because thou shalt not guide eyeballs away from the website.
I feel that journalism has immense social value (I’d call it an absolute necessity) and ideally it is funded publicly and uses the academic tenure style approach.
kasey_junk 20 days ago [-]
I think you have a biased belief in the history of journalism. The news now is not in any way more optimized for selling content than the past commercial media.
And the history of state run media is not particularly aligned with the idea that “the truth” was the goal.
ghaff 20 days ago [-]
And Carreyou worked for the Wall Street Journal and, as I recall, left because he wasn't allowed to be paid for speaking. Public funding has its own set of conflicts; look at any history of public television/radio funding.
jimmytucson 20 days ago [-]
Anecdotal but my spending habits changed a lot during lockdown and it's been an uphill battle to get them back to normal.
There was a period there where we were flush with valuable cash that you wanted to just spend, just for the dopamine hit in some cases, but also because you knew the cash was going to be worth less over time. Getting stimulus checks was a bit of a mindfuck too. We still shop almost exclusively on our phones, and it's so easy to just "add to cart" and have someone put it in my trunk or drop it at my doorstep.
Cut to a few years later and the cost of things has risen faster than my income and my brain is still "COVID rich", I can see why credit card balances are higher and defaults are more common.
yulker 20 days ago [-]
How does $2k spread across a couple of checks make people feel they were "COVID rich" is something I just can't wrap my head around. Even for someone with a low income this would amount to at most a paycheck or two extra
JohnMakin 20 days ago [-]
I struggle adjusting my tone when responding to comments like this, so just know any snarkiness is purely accidental and colored by many years living in an extremely high cost of living area at a joke of a minimum wage.
Living paycheck to paycheck, truly, and I mean truly in that sense where you need to wait for checks to clear before buying groceries occasionally - is extremely common. When you live like this long enough, "big" costs start adding up. That funny sound in your car that you can't afford to get fixed gets worse. Your tooth hurts super bad, but can I afford a $1000 dentist bill? I'll just hope it doesn't get worse. Maybe your kid gets really sick, forcing you to take time off you cannot afford to (not everyone is salaried or has vacation/PTO policies), adding to the strain. You go to credit cards to stretch things out, but of course that has a limit to how far it can go, especially when you're barely treading water. Eventually you will drown, something has to break. What it is varies and will probably largely determine the long-term outcome of the situation.
Anyway, all this to say, there have been many times in my life where these nagging, lingering problems that caused significant strain and hardship in my life that I simply could not afford to fix would have been solved immediately with a few thousand dollars, or whatever "trivial" amount you want to put as a value here. $2000 can actually be a lot more than that when you consider interest and paying down a credit card debt. I can think of one very specific time in my life where $500 being loaned to me was the difference between where I am now and being out on the street, and that is not an exaggeration whatsoever.
The reason you cannot wrap your mind around it, and why this bothers me, is that comments like this come from people that truly cannot imagine how massive swaths of the united states, and more broadly live day to day - it comes from a position of enormous privilege, even if you may not realize/acknowledge it. To me, I struggle to imagine how this comment I am responding to can be made at all, but I know our life experiences probably differ in a drastic way.
JohnMakin 20 days ago [-]
As a more personal note, and without responding to some other victim-blamy comments in the larger thread that kind of irritate me, the only way I got out of my situation was a big (to me, a similar amount as being discussed in this thread) financial gambling windfall that led me to being able to purchase a cheap vehicle and expand the hours I was able to work due to having semi-reliable (it was a cheap ford piece of crap that constantly broke, but it was something) vehicle. From there I was able to enroll in community college, which luckily was free-ish for the income I was at, which is way too low of a threshold. I could not qualify for any kind of government aid whatsoever despite living in "welfare state" CA because at $15,032 a year I was well, well over the limit of what qualified you for food stamp assistance or anything like that. Pre-ACA healthcare was completely out of the question and I amassed $200,000 in medical debt that sidelined me for many years before it fell off my credit report.
I am very lucky in that things panned out (relatively, I still deal with residual issues due to living that way for as long as I did, about 15 years) and I was somehow able to finish school due to traits I believe not many people are lucky enough to have. I don't believe at all that many people in this situation are there of their own fault, and I'd die on that hill, but I can only provide my own brief story and some really basic cost of living statistics that are very easy to look up. It's bleak out there.
vladms 20 days ago [-]
I read the original reply as "how can extra 2k change your habits or expectations", your interpretation seems to be "how can extra 2k make a difference".
Only the author can detail on what he really means, but do you think the extra 2k would significantly influence the people's behavior on the medium / long term (I do agree that for many it can have a significant impact on the short term and really help them) ?
JohnMakin 20 days ago [-]
I don’t know what you mean “influence people’s behavior” which implies you think that people who are in this situation are there because of behavioral issues, which I fundamentally disagree with and see no evidence for. I also provided personal examples and could provide many more where this amount was life changing in the long term. To me it’s silly to call this “short term help” when short term problems can cause a massive irrecoverable collapse of a financially vulnerable person’s life in a very short amount of time.
brailsafe 20 days ago [-]
I very much agree with your responses and can relate to them on some level, but I do also disagree with your interpretation that the other person's interpretation necessarily means that a person needs to be in whichever financially dire situation they're in because of poor financial behavior; quite a mouthful, I know.
For example, I've been at absolute zero and living in my car largely because I just couldn't find a job and literally ran out of money trying (I guess count the car and laptop as an asset, w/e, but actually in the red), and if I'd been given 2x $2k cheques, I'd have a hard time finding a way that it would change my habits for positive or negative for longer than a few months, except if I'd looked for a quick source of substance based relief, which I didn't and wouldn't but assume that's irrelevant for now. I'd probably just try to stretch as far as possible and maybe get a few more calories, or a shower, or temporary gym membership. I can sympathize with the confusion somewhat, because to influence my decision making long-term, I'd have to be set back or set forward in a more reliable way than sudden burst of cash. Like I'm not going to get a loan or a 1 year apartment lease, it would be more like a campground instead of the street for a week every month. I do think worst case scenario, back to the substance topic, is that if you're in a really bad place financially, for no fault of your own (which I absolutely agree that this applies to a majority of people in those situations), it's that you become addicted to something, but everyone's dealt a different hand from a different deck and I do believe I'm way off the mark in terms of what other people might do.
Edit: Actually, that sort of windfall might also make it feel way easier to start spending on food delivery bs, which I have to imagine is a somewhat crippling negative long-term financial habit, especially if you're already working like hell with a family and it's an obvious efficiency increase.
vladms 19 days ago [-]
By influence people behavior I mean for example "make them thinking about spending more than they were spending before receiving the 2k, 6 months after they stopped receiving the aid". And I mean by this impulsive spending, not planning and the like. You will tell me "but they need that, it's not impulsive, etc.". But don't forget we started from the article that "defaults jump to...". This can be due to multiple causes: "people got actually poorer" (not related mainly to behavior, but more to economy) OR "people changed behavior and suddenly they do things they were not doing before" (possible).
To clarify my opinion (hopefully beyond doubt so that you can't imply things I do not think), I think that blaming people will not solve anything, people are not poor due to behavioral issues, people that are currently poor must just be aided (in multiple ways) to get out of the situation. But people do react differently to different ways of helping, and as we don't have infinite resources, we need to discuss how such interventions affect them on short/medium/long term.
If you prefer more to find points in which you disagree (points that were not clearly there or semantic points as "short term help") I don't think I can bring anything to the discussion. I remained without a formed opinion of why the jump in defaults appeared...
hansvm 20 days ago [-]
It's something like 4 post-tax paychecks for people at minimum wage, even better if they weren't full-time (more common than you might imagine even amongst people trying to move up, since low-wage employers tend to shove hours down so that you don't accumulate overtime if they have to call you in suddenly, and they all want you to work the same busy hours, making truly non-overlapping jobs challenging to come by).
I've been that poor before (never _truly_ struggling like some countries experience, but unable to comfortably afford both food and a roof), and some other units might make that check make more sense:
- 4.5 yrs worth of rice, flour, or beans (the bulk of my diet by weight and by cost)
- 5 months of rent
- 5.5 yrs of electricity (almost all of which went to cooking or refrigeration -- heat was unnecessary unless it was under 0F outside)
- a new-to-me car, enough money for the parts that I'll inevitably have to buy to fix any used car shortly after I buy it, and enough gas to drive to work for a year
When you're struggling paycheck to paycheck, that's a life-changing amount of money. I'd already escaped that life by the time covid hit, but if I hadn't then that might've been my ticket out.
As to how somebody in better circumstances might be "COVID rich"? I can only speculate, but even in the middle class people tend to have a number of "essential" payments: health insurance, mortgage/rent, newish clothes for their kids, you should probably eat a vegetable once in awhile, .... People are living "paycheck to paycheck" in those more comfortable lifestyles, and going from $0 to $2000 in discretionary income is huge. That's a year of weekly date nights at someplace better than McDonald's, a year of monthly date nights at a pretty good steakhouse or other gourmet opportunity, kayaks and road-trip money for the whole family, a very nice clavinova and a few months of lessons, ....
In either case, I suspect the key to understanding is to compare that $2k (really $2.2k-$3.3k in equivalent income depending on relevant tax details) to $0 rather than to total expenses.
IncreasePosts 20 days ago [-]
You might not understand how precarious many people's spending habits are. After all of your bills and necessities are paid, many people only have a few hundred dollars per month spare. So if you get $2,000 popped in your lap, that might be the equivalent of 9 months of fun time money for them.
SoftTalker 20 days ago [-]
The weird thing to me is, that knowing full well how important every dollar is, most people in this sitution would blow that $2k on frivolities, rather than save it or try to make it last. It's part of the psychology of being poor. Money is something that never lasts, so when you have some, you're inclined to spend it immediately.
bwb 20 days ago [-]
Why do you think it was on frivolities?
Based on stats looks like they massively paid down debt.
FireBeyond 20 days ago [-]
I think Walmart got some negative press (read: "business as usual") for having a bunch of sales on TVs and other electronics right there in the entrance way after the first stimulus checks were mailed, all priced at exactly the same amount as the check.
throwway120385 20 days ago [-]
I've lived in places where that would be 6 months rent.
jimmytucson 20 days ago [-]
It wasn't just the stimulus checks, it was also the increase in income from job hopping, seeing my 401k and brokerage accounts explode, etc. I'm not saying it was rational or that stimulus checks weren't a good idea, I'm just reflecting on my own personal psychology. Not surprised it doesn't match everyone's!
ska 20 days ago [-]
> feel they were "COVID rich" is something I just can't wrap my head around.
I think that term ("Covid rich") isn't meant just for the checks, but for the general increase of disposable income.
If you are low income, $2-3k in checks can effectively be a pretty big windfall as people note in this thread.
If you were middle income, there was probably a bunch of discretionary spending on e.g. meals out, shows, vacations that you didn't spend compared to previous years. It's not hard to see that being an "extra" 5 figures for lots of families.
conductr 20 days ago [-]
For higher incomes, people spend a lot on travel, the inability to travel for a period during Covid meant tens of thousands of dollars of available budget for other things. This is what these people used to do all their home remodeling.
On the lower end, assuming you were able to WFH the instant savings from not having to commute (gas, tolls, etc). Was a pretty big change to your budget.
Other things like childcare can be a significant expense for many families and it’s a huge change when kids were forced home and the expense was avoided. Some of these things came with reduced household incomes, layoffs, etc for other households. But if you were able keep your income and just reap the savings then you benefit. At first, before inflation kicked in, but since then if you’re income hasn’t increased ~30% or more since 2019 (very dependent on your locale) then you’ve probably been digging a hole the past ~2 years, unless you are a great with budgeting and cut back in real time as prices increased. My feeling is it’s been had to do for many people as most people don’t budget and I know for many income hasn’t grown enough to keep pace with inflation.
I’m pretty pessimistic about Covid economics/politics. My opinion is it should have triggered a global recession, likely worse than the financial crisis. There’s still a ton of inflation that needs to flush through the financial system. While we talked about flattening the curve of the virus, we really just flattened the curve of the economic fallout of such a large event. I think a period of austerity is likely going to be required. Rates and prices have a lot of people locked in their houses or out of home ownership, average vehicle age is at a record high, people are dining out less, even cutting back on their beloved Starbucks, etc so I think the signs of this are ramping up. I’m not quite sure how it plays out, especially with the US political leadership changes coming up; but I feel like the majority of Americans (at least) have some financial strains coming their way, likely uncomfortable changes will need to be made and will feel like a type of austerity to us.
mulmen 20 days ago [-]
How does $3,000.00 become five figures?
Do you mean four or that four figures feels like five?
ska 20 days ago [-]
>> ("Covid rich") isn't meant just for the checks,
and
>> ..., there was probably a bunch of discretionary spending on e.g. ...
i.e. money in your bank account that in a "normal" year you would have spent already. On top of the checks.
mulmen 20 days ago [-]
So a $3,000.00 check is part of a five figure increase in unallocated discretionary income?
chrisweekly 20 days ago [-]
citation needed by me (sorry) but a few years ago I was surprised by an apparently validated assertion that something like 60% of all US households would be unable to come up with more than $2k cash given a month's time
conductr 20 days ago [-]
$2k is massive sum for most US households. Many are a flat tire away from bankruptcy, they lean on cash advances and their communities to help them through simple things like a flat tire.
I grew up kinda poor and lived this as a kid, my family was always helping or being helped by a neighbor or something. Through my friends and some extended family I knew these things were like a sign of our “class” and even slightly more secure people would never do them, it would even be a social faux pas to even ask for help. Now, at middle aged, I’ve done pretty well for myself and sometimes make other types of faux pas statements like “just buy a new car instead of dealing with that”. I have to be somewhat mindful that even a 10 year old used car is a huge purchase for many people. Even if it’s in good shape and can get another 5-10 years out of it, and would technically be the best move, it’s not viable if they can’t afford it or have to subject to some usurious loan.
TBH I generally like to just take the “it’s impolite to talk about money” approach unless I know the person well enough. Although I’m a financial professional so people tend to like asking my opinion/advice on a lot of things, even if I barely know them, I have found that I prefer to avoid those types of conversations altogether until I know you pretty well.
whaleofatw2022 20 days ago [-]
I believe it. Happened to me once or twice when I was making under 50k/yr over a decade ago.
jeffbee 20 days ago [-]
I think what you wanted to cite is "Financially Fragile Households", Lusardi et al, 2011. But, instead of getting the conclusion from the opinion page of the WSJ it would probably be better to read the paper and especially the notes by reviewers at the end of the article, particularly the comment of Pence which is almost a rebuttal.
charlie0 20 days ago [-]
Me neither. I've just accepted that a majority of people are horribly bad at finance, what the reasons are, I don't care to find out. I'm sure it's a huge list of things thay are not solvable. You know what I mean of you've ever tried to help someone by lending them money.
naming_the_user 20 days ago [-]
A lot of people are just financially illiterate. I grew up poor and the other comments here are super foreign to me. I agree that a couple of grand would be useful but not for buying toys, mostly for fixing stuff.
Especially the idea that money just disappears so spend it whilst you have it. That’s like saying your legs might disappear so cut them off now to avoid the surprise.
LordDragonfang 20 days ago [-]
In addition to what the other commentors have said, regularly going out to eat or have a drink or two adds up quick, and being unable to do that during the pandemic forced people to save all the money they would otherwise have spent on that. This left people with a bunch of cash to spend on other things.
whaleofatw2022 20 days ago [-]
There were lots of cases where covid unemployment pay was better than better than minimum/near minimum wage.
20 days ago [-]
reaperducer 20 days ago [-]
Cut to a few years later and the cost of things has risen faster than my income and my brain is still "COVID rich", I can see why credit card balances are higher and defaults are more common.
Add to it the rise of buy-now-pay-later schemes like Klarna and Affirm, which for a long time would allow you to make your payments with a credit card, allowing people to run up more debt faster than ever before.
It's my understanding† that making payments with a credit card is no longer permitted, so now these companies are pulling cash out of already over-extended people's checking accounts, keeping them from paying their credit cards.
Fintech wins. Traditional credit cards lose. Human beings lose harder.
† I have never used any of these services, but I know people who have, and it all sounds like loan sharking to me.
whaleofatw2022 20 days ago [-]
Klarna/affirm do often seem to be the thing I see 'not financially stable' folks use.
Most recent example being someone considered an 'adult child' of the state and on SSDI that used Affirm to pay for some xmas presents.
> It's my understanding† that making payments with a credit card is no longer permitted,
Ive never used them myself either but it would surprise me if they allowed credit cards for payment ever.
In my head they were trying to make their money back on the loan via the merchant rate 'padding' (i.e. usually 1-2% of the item price).
Which of course, in this non NZIRP/ZIRP climate means they have to find other ways of making/saving money... (didn't klarna just do a layoff?)
chung8123 20 days ago [-]
It is very hard to cut spending. This is why when you get a raise they say to not raise your living costs. I am sure this has been studied but going from even temporary luxury back to normal spending is tough.
lowercased 20 days ago [-]
That seems odd. I got stimulus checks too, but I never once felt "covid rich", and my spending patterns during 2020-2023 hardly changed at all.
Lord_Zero 20 days ago [-]
To a lot of people that was more money they have ever had all at once that wasn't immediately eaten up by bills.
jopsen 20 days ago [-]
Stimulus checks might affect some income levels more than others.
And some people more than others.
alistairSH 20 days ago [-]
Opposite experience here. We spent a ton LESS during COVID. No stimulus for us, but lots of cancelled travel. Did some light home reno, but nowhere near enough to offset reduced spending on travel, dining out, and other entertainment.
skybrian 20 days ago [-]
If you're worried about inflation, why not invest the money?
jimmytucson 20 days ago [-]
Oh, I definitely did invest some of it (if you can call playing with cash in a brokerage account investing), and seeing some of the returns I got made me feel even richer.
I should stress that I am not a totally rational or irrational actor, I'm pretty much average intelligence, and this is one person's anecdote.
gnatolf 20 days ago [-]
This is such an odd take
blueelephanttea 20 days ago [-]
This entire article seems to be completely based on a non-inflation adjusted write-off value. It is not surprising to me that we are setting write-off records. We were bound to at some point!
It is clear that delinquencies have ticketed up over the last year or two. But this article does not do a particularly good job about contextualizing if this is actually concerning.
Pretty tough to look at that and determine if this clearly concerning or an moderate adjustment to a changing post-covid environment.
pests 20 days ago [-]
I’m having trouble getting thinking this through. If the rate was inflation adjusted, would it appear better or worse?
blueelephanttea 20 days ago [-]
It would appear better. The absolute value of written off loans will perpetually increase since the total amount in loans will increase.
The record 2010 number is ~$80 billion in 2024 dollars vs $46 billion this year.
listenallyall 20 days ago [-]
46 billion is only 9 months of this year. Unlikely to reach 80, but the writeoffs are accelerating, hence the article.
blueelephanttea 20 days ago [-]
The 2010 $80 billion is a first 3 quarters number too. I'm objecting to the media's obsession with using the persistent march of inflation to constantly write headlines about record this or record that.
I'm agnostic to whether this is some important or stark economic indicator. But I think the media should write articles that use rates not absolute values when they choose to write these articles.
listenallyall 20 days ago [-]
> The 2010 $80 billion is a first 3 quarters number too
I dont think it is. The article includes a chart of the first 9 months of the past 20 years, 2010 looks like about 55 billion or so. In any case, it is very clear from that chart that the 2024 number is significantly higher than any other year except 2010. Not everything is measured in "rates," most things are just measured in dollars. Anyway credit card charges are unlikely to be subject to the exact same inflation rate as general goods like CPI, given that few people charge their housing to a credit card.
And the article does mention Capital One's writeoff rate increase over the past year.
blueelephanttea 19 days ago [-]
> The article includes a chart of the first 9 months of the past 20 years, 2010 looks like about 55 billion or so.
$55 billion in 2010 is $80 billion in 2024 dollars. I kind of feel like my original point was pretty clear.
20 days ago [-]
paxys 20 days ago [-]
XYZ metric is at its highest ever!
Is it adjusted for inflation and the rise in population in that period? (hint: it isn't)
10 seconds of simple math usually takes the steam out of the vast majority of such sensationalized headlines.
piva00 20 days ago [-]
You're correct about the figure not being adjusted for inflation but the metric on the rise compared to last year is concerning:
> Credit card lenders wrote off $46bn in seriously delinquent loan balances in the first nine months of 2024, up 50 per cent from the same period in the year prior and the highest level in 14 years
bbatsell 20 days ago [-]
That is not an independent variable. For example, lenders could have decided that the market in 2023 was on the way up and not writing off as much debt would allow them to collect more delinquent accounts in the future. In 2024, they think that anyone who would have been able to pay them has done so, so they wrote off the defaults they postponed from 2023 and also increased the speed of their write offs because their predictions about the economy changed. While it tells you something, it’s certainly not an accurate measure of spending habits or ability to pay.
sosodev 20 days ago [-]
A lot of those metrics are percentages which are always adjusted for population.
Thats because anyone with a 2.5% mortgage would rather die before losing their home.
34% of mortgages are below 3% interest rate, which means their house payment is at least 30% cheaper than renting. Nobody is going to give that up easily.
Here you could easily go from a 3/3 single family home to a 2br apartment for the same price monthly. Which means you would need to move into a 1br apartment to save any money.
All this to say, the first thing to go is the credit card payments, then the car payments, and finally the mortgage payments.
reactordev 20 days ago [-]
This. Anyone I know that has a sub 3% is planning on staying put until their end. The rest of us are never going to see sub 3% in our lifetimes again. 6% is here to stay. Maybe in the distant future we hit 5.5% but unlikely.
I went through a divorce and my ex got the house. I thought I would travel for a few years before buying another one and I missed out on the 3% rates.
jghn 20 days ago [-]
I don't disagree but people talking about current rates as if they're terrible distort reality. It really wasn't that long ago (aughts) that rates in the 5/6% range were viewed as historically good. And I'm old enough to remember when rates in the teens were normal.
polymathemagics 20 days ago [-]
Yeah, and for a lot of earners in high tax states, the effective interest rate you pay is essentially almost half off thanks to the mortgage interest tax deduction. If your marginal tax rate across federal / state / local is high (mine's 46%), then you can get back almost half the interest. Which shortens the gap between a 3% vs 6% mortgage, the effective difference being more like 1.5% than 3%.
flatline 20 days ago [-]
I got a 3.25% loan post-divorce in a part of the country I hated, and ended up selling and relocating. I do not plan on buying again soon, current prices combined with current interest rates make it unappealing. If home prices come off or stagnate long enough, I will once again consider buying. Right now I can set aside $1000/mo renting, which is enough to pay someone else for the hassle of maintaining a house.
silisili 20 days ago [-]
Never say never. It may be a long while til we see 3%, but 5.5% isn't far off. Some saw about that during the recent dip a few months ago.
There are of course a lot of factors, but I think we'll be back in the high fives at some point in 2025 and settle around 4.5-5 after that. That's if Mr Tariff doesn't spike inflation.
lm28469 20 days ago [-]
6%?! Damn in France we went from 1% to 4% and it felt like the end of the world, 6% is insane
JeremyNT 20 days ago [-]
Key to know for people outside the US (if you don't already know this) is that here you almost always deal in 30 year fixed mortgages.
The buyer will never see their rates go higher than this in the life of the loan, and in reality, if/when rates drop again, they can refinance to a new 30 year fixed at the lower rate.
ethagnawl 20 days ago [-]
> All this to say, the first thing to go is the credit card payments, then the car payments, and finally the mortgage payments.
I do wonder how much of these credit card balances are people paying ~$3.50 per gallon to fill up and kit out SUVs and trucks they're paying ~$700 a month for.
As someone who strives to spend/save responsibly and drives wholly owned used cars and is still a few paychecks away from disaster, I do not understand how working/middle class people are keeping up with these costs. I notice our local Chevy dealership is also full to the brim (literally covering all of the grass on their lot) with new trucks and SUVs. I would love to better understand who is buying/leasing those vehicles and how they're keeping them on the road -- for now.
20 days ago [-]
trenning 20 days ago [-]
Counter point, I have a 2.25% fixed 30yr but am looking to sell in the next couple months.
Reason being I’m in a townhouse. They do not appreciate at the same rate as single family detached and it also carries an endlessly increasing hoa fee.
Due to the hoa increases it also limits how well a property can cash flow as a rental so keeping the property as an investment is doubly less attractive as often you can forgo rental income in lieu of asset appreciation.
jjav 18 days ago [-]
HOAs are the only thing so evil that it is more favorable to give up a 2.25% mortgage than to deal with a HOA!
arealaccount 20 days ago [-]
Can confirm - if I moved to a home that was the same price ignoring realtors fees and whatnot, my 2000/mth mortgage would go to almost 4.
paxys 20 days ago [-]
Wait for all the 2.x% 7/1 and 5/1 jumbo ARMs issued between 2015-2022 to renew at 7%+ and we'll see how strong the mortgage market actually is.
jancsika 20 days ago [-]
Well, 2015 was about 10 years ago now, and both 5 and 7 are less than ten.
So how about you tell us how some of them have already done renewing at 6%+? Did bad things happen?
Edit: clarification
selectodude 20 days ago [-]
All? I’d be shocked if 5 percent of mortgage originations in the US are ARMs.
Why the hell would you get an ARM when the fixed rate was 3%? The only way to go from there is up.
dylan604 20 days ago [-]
There are a lot of people just uninformed people that will take whatever deals presented when that deal means getting a house. The person giving them the deal does not care at all about whether they can afford it or not, especially knowing that the loan was going to be repackaged and sold probably before the first payment was due let alone when the rates change
nipponese 20 days ago [-]
Where is the ARM mortgage data?
jraby3 20 days ago [-]
Credit cards are probably an earlier indicator than mortgages.
hipadev23 20 days ago [-]
It did not become particularly easier to qualify for new mortgages over the past five years the way it did in 2004-2008. Nominal prices accelerated, yes, but rates were around 2.5%.
Generally speaking people who are in mortgages are able to afford them because they're on fairly decent terms and lent to people who are capable of paying. But nobody is selling if they're going to need a new mortgage.
HaZeust 20 days ago [-]
Man, I hate when mortgage defaults are brought up in conversations like this. The next frustration in the economic boom-bust cycle is 99% likely to NOT come from mortgage-backed securities or anything mortgage-based.
Yes, we understand it triggered the 2008 recession.
No, it probably won't be the canary in the coalmine for the next one.
There's no economic boom, just a stock market boom. People are helped in proportion to the money they have in the market.
sgustard 20 days ago [-]
A trip to Disneyland costs thousands of dollars per person, Taylor Swift tickets the same, but these attract record crowds. Cruises and hotels and restaurants are full. How would you define an economic boom?
rchaud 19 days ago [-]
> How would you define an economic boom?
The way in which "booming economy" phrasing is used in conversation, one would imagine that it refers to growth in GDP that has a multiplier effect in the local economy. In practice, it really just means spending is up now, but will deflate as soon as credit is harder to come by.
A lot of vacations, cars and home improvements are funded by home equity loans, not actual disposable income.
paxys 20 days ago [-]
"Rich people exist therefore the economy is doing great".
Meanwhile the average American doesn't have a spare $1500 set aside for a life threatening emergency, let alone for a Taylor Swift concert.
rchaud 19 days ago [-]
Not to mention Disneyland and Taylor Swift concerts will have a significant population of tourists whose spending patterns would be independent of the state of the US economy.
vladimirralev 20 days ago [-]
And it's not so much that the stock market is booming, rather the value of the dollar is imploding. Those are equivalent statements but media chose to preset the "number go up" picture. Reality is for every number that "goes up", another number goes down, and the number that goes down is the value of cash.
bhelkey 20 days ago [-]
One metric we can look at to see if "dollar is imploding" is the exchange rate of USD to Euro/Yen/Pound over the past 20 years. None of those exchange rates indicate that the dollar is imploding. Instead they indicate that the dollar is extremely strong.
vladimirralev 20 days ago [-]
Similarly we can look at that past 20 years of Euro/Yen/Pound against Argentinian Peso and conclude that it's all fine? Dollar is strong against other currencies only because of the global competitive devaluation.
USD is losing value rapidly. It's amusing to see politicians claiming credit for stocks going up while the food prices are up almost as much, but nobody is responsible for this one. Dollar is down massively and downplaying this fact is only encouraging more of the same.
bhelkey 15 days ago [-]
> Similarly we can look at that past 20 years of Euro/Yen/Pound against Argentinian Peso and conclude that it's all fine?
Have you looked at those conversions?
One June 1st 2007, 1 Argentinian Peso was worth 0.082£, today it is 0.00078£.
nerdponx 20 days ago [-]
There was a huge corporate profit boom as well.
yieldcrv 20 days ago [-]
I wish a President would say that
as well as publications leaning either direction
jaco6 20 days ago [-]
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UncleMeat 20 days ago [-]
Real wages are up, especially for lower earners. Unemployment is low.
vladimirralev 20 days ago [-]
Real wages are not up for low earners. This is such an obvious math flaw I can't understand how nobody is challenging it. Real wages are adjusted for average inflation based on all consumers. However low earners experience much higher inflation than the average, at least double, and their consumption is vastly different (all of it is housing, food and energy in that order). Many of these low wage earners are periodically homeless or otherwise avoid paying bills to begin with.
TeaBrain 20 days ago [-]
Real median wages for full time workers are up a little less than 2.5% since Q4 2019. It could be worse, but it's not really something worth getting excited over.
>Credit card lenders were happy to help, signing up customers who might not have qualified in the past based on income, but looked like safe debtors because their bank accounts were flush with cash
To me that is the biggest reason.
etempleton 20 days ago [-]
I wonder to what extent credit card issuers factored-in pandemic related stimulus into their risk models. If they really considered cash on-hand as a replacement to verified income the stimulus payments would have completely invalidated their existing models.
philip1209 20 days ago [-]
Wasn't this sometimes a bug instead of a feature?
Loaning based on cash instead of income is how Brex and Ramp took on Amex.
(obligatory: "commercial != consumer")
delfinom 20 days ago [-]
That seems to defeat the narrative of "the consumers are struggling due to high interest rates". If they have the cash in their accounts, they shouldn't be the ones largely defaulting.
jandrese 20 days ago [-]
I think the story is that the COVID stimulus checks meant that people who normally live paycheck to paycheck were for the first time showing a healthy bank balance which increased their credit score just enough to qualify. Once the checks stopped they stated defaulting.
losteric 20 days ago [-]
Since when is bank balance considered in credit scores and checks?
They had cash when they signed up, they don't anymore
ac29 17 days ago [-]
I have applied for many credit cards over the years and I have never once seen one that asked about assets, only income.
asdev 20 days ago [-]
it was never an economic boom, just an inflationary boom. AI hype created an echo bubble from 2021 but it's due to pop
jraby3 20 days ago [-]
It was an economic boom based on debt. The US faired much better than europe but most likely due to the massive debt we used and then gave to our citizens (and businesses).
misiti3780 20 days ago [-]
I agree it's going to pop. Unfortunately the market turn will be hard to short as far as i can tell.
chasd00 20 days ago [-]
Yeah I feel the same. Going to adjust to a more conservative portfolio soon and try to minimize the damage to ye’old 401k
delfinom 20 days ago [-]
It is helping the wealthy, about all the government cares about really.
And "low unmployment" and not "median income vs cost of living/inflation".
timewizard 20 days ago [-]
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larrydag 20 days ago [-]
Here is the NY Fed household data statistics on the subject. The NY Fed reports quarterly on US credit and debt. Aggregate delinquency rates going up.
The whole credit system is a big scam anyway, hopefully people will keep defaulting and eventually take it out.
Etheryte 20 days ago [-]
While I get your sentiment, let's not forget that behind every default, there's a life that's struggling to keep it together. This is not people sticking it to the man, it's people who have lost their jobs, been hit with a medical bill, or etc then going on to lose their car and their home.
bee_rider 20 days ago [-]
That’s true, and fair. I was glib due to my annoyance with the system, but of course it is structured to also hurt real people.
Sohcahtoa82 20 days ago [-]
No way.
Buying things on credit is huge because if my credit card is used fraudulently, I'm not out the money while I wait for the fraudulent charges to be reversed.
bee_rider 20 days ago [-]
That’s just a super specific quirk of the current implementation
Sohcahtoa82 20 days ago [-]
How so?
If I didn't pay with credit, then I'd be paying for everything with debit, exposing my debit card number to breaches, skimmers, and other security issues. If my debit card number gets used fraudulently, I literally lose money until I get refunded. That could be a problem if I have a rent/mortgage payment about to come out.
On a credit card, the temporary loss is not mine, it's the credit issuer. My money is safe from fraudulent use of my credit card.
michaelteter 20 days ago [-]
I don't know if the article references credit card interest rates, but I think it's worth also including in the discussion.
I seem to recall that some years back the credit card interest rates were capped at a much lower rate than they are now.
Where this would lead us shouldn't be a surprise to anyone. And at a general level, many current systems in the US are on a clearly unsustainable trajectory. However this collapses, it's going to be really messy.
standardUser 20 days ago [-]
Were standard credit card interest rates ever much below 20%? I think 20-25% has been the normal range for 20+ years (since I've had credit cards), though laws like the one passed under Obama do reign in the banks a little in terms of how brutally they can destroy a delinquent customers livelihood (like limiting default rates and banning other creditors from charging default rates when you default with one creditor).
I always check out the balance transfer offers I receive and use that as a gauge for how cheaply creditors are willing to extend credit. Even with the prime rate jumping up in recent years, you can still get the same 12 months at 0% interest with a 4-5% transfer fee. There was a time during the low-rate era where the average was closer to 18 months and 3% fees, whereas the last few years have leaned towards 9 months and 5%. But the variance has been pretty tame.
US Lenders being overly generous with credit isn't something that started in 2021.
BJones12 20 days ago [-]
> Credit card delinquency rates... remain nearly a percentage point higher than they were on average in the year before the pandemic.
Just another journalist trying to scare you. All that happened is bad debt rose 1% compared to 5 years ago.
blueelephanttea 20 days ago [-]
Not only that, but the headline is a non-inflation adjusted value! We're still well below the peak of 2010!
We might be on the cusp of a collapse, but the media (and HN commentators!) continue to predict 3465 out of the last 2 recessions.
piva00 20 days ago [-]
I mentioned to another comment, you're correct about the figure amount but the concerning part is:
> Credit card lenders wrote off $46bn in seriously delinquent loan balances in the first nine months of 2024, up 50 per cent from the same period in the year prior and the highest level in 14 years
n144q 20 days ago [-]
1. The title still isn't wrong.
2. What does 1% mean in context?
KingOfCoders 20 days ago [-]
1pp != 1%
add-sub-mul-div 20 days ago [-]
Going from 5.2 to 6.1 is a 17% increase, which isn't insignificant.
yieldcrv 20 days ago [-]
Looking at the velocity of how we got to this level is absolutely noteworthy
2OEH8eoCRo0 20 days ago [-]
The election is over, we stop pretending that the market is doing bad.
This is a prime example of a style of reporting that really grinds my gears.
The citation is clearly to another internet source, so a link should be provided. If it truly cannot be linked because it is private, more context is still needed to understand what this data means.
I actually can’t find the source myself, but I can find “Delinquency Rate on Credit Card Loans, All Commercial Banks” from the Federal Reserve. [1]
The percents from that source somewhat match those referenced in the FT quote. “Peaked in July”
- 2024Q1 3.15%
- 2024Q2 3.24%
- 2024Q3 3.23%
Using 2019 as “the year before the pandemic”, the average was 2.5825. Is +0.6475 “nearly a percentage point”? I guess it technically would round up.
Seemingly important context that the quote doesn’t give is that 3.23% is lower than any time 1991Q3 to 2011Q4. But, maybe the trend matters more for this metric.
[1] https://fred.stlouisfed.org/series/DRCCLACBS
https://fred.stlouisfed.org/series/RCCCBBALDPD30P
Delinquent > 30 days
Generally delinquent increase of any percentage is a big red flag as these accounts are statistically very unlikely to make a correction and are a bellwether for greater issues like sustainable future consumer trends. They also betray the real unemployment rate including the us "jobless" hand wavery.
They're clearly not giving their references, calculations, or any basis for comparison, which is awful.
But there's no need to minimize what you've found in your own research, which is that that defaults are up ≈25%.
My focus was critiquing their phrasing, which turns that 25% into 38%.
Like I said, I’m not actually an expert on this to know if the trend is what matters.
Thanks! I feel like this is actually the next reporting step that the source article needed to do. The original data source citation is helpful of course too.
But my feel is the FT author is trying to avoid just listing the numbers, so tries to cleverly explain them and unintentionally creates a meaningless statement. Instead, they should exercise a tiny bit of analysis and tell us on a relative basis the metric has changed since the premise is that it’s changed a lot, how does “higher level” even compare to what the readers can relate to or comparing to another time they where high or the previous record holder. In any case, if I read it’s 25% higher than 2019 I immediately can see how that would be concerning and drastic change and makes me want to read more.
The cynical part of me thinks it’s possibly just a way to increase word count and write with less numbers. But this is one of those cases when the author should use the data to create information for their audience to consume instead of describing the raw data (raw data nearly never needs description, if you’re tempted to do that, just cite/recite it directly). In short, information > raw data > convoluted descriptions of raw data.
Basically what you already said but a little better connection in how moodys probably reported on it.
Credit card lenders wrote off $46bn in seriously delinquent loan balances in the first nine months of 2024, up 50 per cent from the same period in the year prior and the highest level in 14 years, according to industry data collated by BankRegData.
> The citation is clearly to another internet source
How is "data from Moody's" (likely internal, unreleased, or subscriber-only) clearly an internet source?
If not, then it is on the internet somewhere. Whether it is on the “public” or “free” internet is different. If it is not freely available, then they could still give a real citation, so someone else with access to Moody’s private data could find it.
“based on internal data from Moody’s”
“data from Moody’s” with no qualifier indicates the reader should be able to reasonably find the information themselves (which they can’t in this case)
> If it truly cannot be linked because it is private, more context is still needed to understand what this data means.
a sign that lower-income consumers’ financial health is waning
a closely watched measure of significant loan distress
but the bottom third of US consumers are tapped out
consumers’ personal finances are becoming increasingly stretched
Consumer spending power has been diminished
Americans who cannot pay off their credit card bills in full paying $170bn in interest
as a result, more of those borrowers are struggling to pay back their credit card debt
https://www.creditorsbar.org/news/-credit-card-charge-offs-a...
It kind of used to be. There was a level of responsibility despite the organizations being for-profit. But I just cannot pretend this is sufficiently true anymore.
I don’t really see any reason why journalism shouldn’t be for-profit. For example, a business model of producing informative articles and then selling access to those articles could be completely ethical, and a reasonable way to do journalism.
Ad supported media is just a toxic business model though.
Freedom of Speech can be given to everyone very generously, if Broadcasting (distribution) is controlled.
During the hey days of newspapers without Postal subsidies/Railway subsidies and paper mill subsidies it was very expensive for publishers to ship tons of paper across the country everyday. Even today world wide lot of Govts run the Post Office and Railways. And they subsidize rates for newspapers and magazines. Good luck getting that subsidy if you piss off the wrong people.
Same story repeats with licenses for radio/tv/satellite spectrum. Today its just Ads or control of the content factory (see who owns all the loss making news orgs in the land - Corporations). Ad supported just means who ever can bid most for the ad. And the Elites can outbid the plebs every day of the week.
I think both goals can sometimes find harmony and the revenue can support the journalistic endeavour. But that feels less and less true. A lot of for-profit media is optimizing heavily towards clicks, often at the very clear expense of the story. Such as not linking citations because thou shalt not guide eyeballs away from the website.
I feel that journalism has immense social value (I’d call it an absolute necessity) and ideally it is funded publicly and uses the academic tenure style approach.
And the history of state run media is not particularly aligned with the idea that “the truth” was the goal.
There was a period there where we were flush with valuable cash that you wanted to just spend, just for the dopamine hit in some cases, but also because you knew the cash was going to be worth less over time. Getting stimulus checks was a bit of a mindfuck too. We still shop almost exclusively on our phones, and it's so easy to just "add to cart" and have someone put it in my trunk or drop it at my doorstep.
Cut to a few years later and the cost of things has risen faster than my income and my brain is still "COVID rich", I can see why credit card balances are higher and defaults are more common.
Living paycheck to paycheck, truly, and I mean truly in that sense where you need to wait for checks to clear before buying groceries occasionally - is extremely common. When you live like this long enough, "big" costs start adding up. That funny sound in your car that you can't afford to get fixed gets worse. Your tooth hurts super bad, but can I afford a $1000 dentist bill? I'll just hope it doesn't get worse. Maybe your kid gets really sick, forcing you to take time off you cannot afford to (not everyone is salaried or has vacation/PTO policies), adding to the strain. You go to credit cards to stretch things out, but of course that has a limit to how far it can go, especially when you're barely treading water. Eventually you will drown, something has to break. What it is varies and will probably largely determine the long-term outcome of the situation.
Anyway, all this to say, there have been many times in my life where these nagging, lingering problems that caused significant strain and hardship in my life that I simply could not afford to fix would have been solved immediately with a few thousand dollars, or whatever "trivial" amount you want to put as a value here. $2000 can actually be a lot more than that when you consider interest and paying down a credit card debt. I can think of one very specific time in my life where $500 being loaned to me was the difference between where I am now and being out on the street, and that is not an exaggeration whatsoever.
The reason you cannot wrap your mind around it, and why this bothers me, is that comments like this come from people that truly cannot imagine how massive swaths of the united states, and more broadly live day to day - it comes from a position of enormous privilege, even if you may not realize/acknowledge it. To me, I struggle to imagine how this comment I am responding to can be made at all, but I know our life experiences probably differ in a drastic way.
I am very lucky in that things panned out (relatively, I still deal with residual issues due to living that way for as long as I did, about 15 years) and I was somehow able to finish school due to traits I believe not many people are lucky enough to have. I don't believe at all that many people in this situation are there of their own fault, and I'd die on that hill, but I can only provide my own brief story and some really basic cost of living statistics that are very easy to look up. It's bleak out there.
Only the author can detail on what he really means, but do you think the extra 2k would significantly influence the people's behavior on the medium / long term (I do agree that for many it can have a significant impact on the short term and really help them) ?
For example, I've been at absolute zero and living in my car largely because I just couldn't find a job and literally ran out of money trying (I guess count the car and laptop as an asset, w/e, but actually in the red), and if I'd been given 2x $2k cheques, I'd have a hard time finding a way that it would change my habits for positive or negative for longer than a few months, except if I'd looked for a quick source of substance based relief, which I didn't and wouldn't but assume that's irrelevant for now. I'd probably just try to stretch as far as possible and maybe get a few more calories, or a shower, or temporary gym membership. I can sympathize with the confusion somewhat, because to influence my decision making long-term, I'd have to be set back or set forward in a more reliable way than sudden burst of cash. Like I'm not going to get a loan or a 1 year apartment lease, it would be more like a campground instead of the street for a week every month. I do think worst case scenario, back to the substance topic, is that if you're in a really bad place financially, for no fault of your own (which I absolutely agree that this applies to a majority of people in those situations), it's that you become addicted to something, but everyone's dealt a different hand from a different deck and I do believe I'm way off the mark in terms of what other people might do.
Edit: Actually, that sort of windfall might also make it feel way easier to start spending on food delivery bs, which I have to imagine is a somewhat crippling negative long-term financial habit, especially if you're already working like hell with a family and it's an obvious efficiency increase.
To clarify my opinion (hopefully beyond doubt so that you can't imply things I do not think), I think that blaming people will not solve anything, people are not poor due to behavioral issues, people that are currently poor must just be aided (in multiple ways) to get out of the situation. But people do react differently to different ways of helping, and as we don't have infinite resources, we need to discuss how such interventions affect them on short/medium/long term.
If you prefer more to find points in which you disagree (points that were not clearly there or semantic points as "short term help") I don't think I can bring anything to the discussion. I remained without a formed opinion of why the jump in defaults appeared...
I've been that poor before (never _truly_ struggling like some countries experience, but unable to comfortably afford both food and a roof), and some other units might make that check make more sense:
- 4.5 yrs worth of rice, flour, or beans (the bulk of my diet by weight and by cost)
- 5 months of rent
- 5.5 yrs of electricity (almost all of which went to cooking or refrigeration -- heat was unnecessary unless it was under 0F outside)
- a new-to-me car, enough money for the parts that I'll inevitably have to buy to fix any used car shortly after I buy it, and enough gas to drive to work for a year
When you're struggling paycheck to paycheck, that's a life-changing amount of money. I'd already escaped that life by the time covid hit, but if I hadn't then that might've been my ticket out.
As to how somebody in better circumstances might be "COVID rich"? I can only speculate, but even in the middle class people tend to have a number of "essential" payments: health insurance, mortgage/rent, newish clothes for their kids, you should probably eat a vegetable once in awhile, .... People are living "paycheck to paycheck" in those more comfortable lifestyles, and going from $0 to $2000 in discretionary income is huge. That's a year of weekly date nights at someplace better than McDonald's, a year of monthly date nights at a pretty good steakhouse or other gourmet opportunity, kayaks and road-trip money for the whole family, a very nice clavinova and a few months of lessons, ....
In either case, I suspect the key to understanding is to compare that $2k (really $2.2k-$3.3k in equivalent income depending on relevant tax details) to $0 rather than to total expenses.
Based on stats looks like they massively paid down debt.
I think that term ("Covid rich") isn't meant just for the checks, but for the general increase of disposable income.
If you are low income, $2-3k in checks can effectively be a pretty big windfall as people note in this thread.
If you were middle income, there was probably a bunch of discretionary spending on e.g. meals out, shows, vacations that you didn't spend compared to previous years. It's not hard to see that being an "extra" 5 figures for lots of families.
On the lower end, assuming you were able to WFH the instant savings from not having to commute (gas, tolls, etc). Was a pretty big change to your budget.
Other things like childcare can be a significant expense for many families and it’s a huge change when kids were forced home and the expense was avoided. Some of these things came with reduced household incomes, layoffs, etc for other households. But if you were able keep your income and just reap the savings then you benefit. At first, before inflation kicked in, but since then if you’re income hasn’t increased ~30% or more since 2019 (very dependent on your locale) then you’ve probably been digging a hole the past ~2 years, unless you are a great with budgeting and cut back in real time as prices increased. My feeling is it’s been had to do for many people as most people don’t budget and I know for many income hasn’t grown enough to keep pace with inflation.
I’m pretty pessimistic about Covid economics/politics. My opinion is it should have triggered a global recession, likely worse than the financial crisis. There’s still a ton of inflation that needs to flush through the financial system. While we talked about flattening the curve of the virus, we really just flattened the curve of the economic fallout of such a large event. I think a period of austerity is likely going to be required. Rates and prices have a lot of people locked in their houses or out of home ownership, average vehicle age is at a record high, people are dining out less, even cutting back on their beloved Starbucks, etc so I think the signs of this are ramping up. I’m not quite sure how it plays out, especially with the US political leadership changes coming up; but I feel like the majority of Americans (at least) have some financial strains coming their way, likely uncomfortable changes will need to be made and will feel like a type of austerity to us.
Do you mean four or that four figures feels like five?
>> ..., there was probably a bunch of discretionary spending on e.g. ...
i.e. money in your bank account that in a "normal" year you would have spent already. On top of the checks.
I grew up kinda poor and lived this as a kid, my family was always helping or being helped by a neighbor or something. Through my friends and some extended family I knew these things were like a sign of our “class” and even slightly more secure people would never do them, it would even be a social faux pas to even ask for help. Now, at middle aged, I’ve done pretty well for myself and sometimes make other types of faux pas statements like “just buy a new car instead of dealing with that”. I have to be somewhat mindful that even a 10 year old used car is a huge purchase for many people. Even if it’s in good shape and can get another 5-10 years out of it, and would technically be the best move, it’s not viable if they can’t afford it or have to subject to some usurious loan.
TBH I generally like to just take the “it’s impolite to talk about money” approach unless I know the person well enough. Although I’m a financial professional so people tend to like asking my opinion/advice on a lot of things, even if I barely know them, I have found that I prefer to avoid those types of conversations altogether until I know you pretty well.
Especially the idea that money just disappears so spend it whilst you have it. That’s like saying your legs might disappear so cut them off now to avoid the surprise.
Add to it the rise of buy-now-pay-later schemes like Klarna and Affirm, which for a long time would allow you to make your payments with a credit card, allowing people to run up more debt faster than ever before.
It's my understanding† that making payments with a credit card is no longer permitted, so now these companies are pulling cash out of already over-extended people's checking accounts, keeping them from paying their credit cards.
Fintech wins. Traditional credit cards lose. Human beings lose harder.
† I have never used any of these services, but I know people who have, and it all sounds like loan sharking to me.
Most recent example being someone considered an 'adult child' of the state and on SSDI that used Affirm to pay for some xmas presents.
> It's my understanding† that making payments with a credit card is no longer permitted,
Ive never used them myself either but it would surprise me if they allowed credit cards for payment ever.
In my head they were trying to make their money back on the loan via the merchant rate 'padding' (i.e. usually 1-2% of the item price).
Which of course, in this non NZIRP/ZIRP climate means they have to find other ways of making/saving money... (didn't klarna just do a layoff?)
And some people more than others.
I should stress that I am not a totally rational or irrational actor, I'm pretty much average intelligence, and this is one person's anecdote.
It is clear that delinquencies have ticketed up over the last year or two. But this article does not do a particularly good job about contextualizing if this is actually concerning.
Here is the actual rate:
https://fred.stlouisfed.org/series/CORCCT100S
Pretty tough to look at that and determine if this clearly concerning or an moderate adjustment to a changing post-covid environment.
The record 2010 number is ~$80 billion in 2024 dollars vs $46 billion this year.
I'm agnostic to whether this is some important or stark economic indicator. But I think the media should write articles that use rates not absolute values when they choose to write these articles.
I dont think it is. The article includes a chart of the first 9 months of the past 20 years, 2010 looks like about 55 billion or so. In any case, it is very clear from that chart that the 2024 number is significantly higher than any other year except 2010. Not everything is measured in "rates," most things are just measured in dollars. Anyway credit card charges are unlikely to be subject to the exact same inflation rate as general goods like CPI, given that few people charge their housing to a credit card.
And the article does mention Capital One's writeoff rate increase over the past year.
$55 billion in 2010 is $80 billion in 2024 dollars. I kind of feel like my original point was pretty clear.
Is it adjusted for inflation and the rise in population in that period? (hint: it isn't)
10 seconds of simple math usually takes the steam out of the vast majority of such sensationalized headlines.
> Credit card lenders wrote off $46bn in seriously delinquent loan balances in the first nine months of 2024, up 50 per cent from the same period in the year prior and the highest level in 14 years
34% of mortgages are below 3% interest rate, which means their house payment is at least 30% cheaper than renting. Nobody is going to give that up easily.
Here you could easily go from a 3/3 single family home to a 2br apartment for the same price monthly. Which means you would need to move into a 1br apartment to save any money.
All this to say, the first thing to go is the credit card payments, then the car payments, and finally the mortgage payments.
I went through a divorce and my ex got the house. I thought I would travel for a few years before buying another one and I missed out on the 3% rates.
There are of course a lot of factors, but I think we'll be back in the high fives at some point in 2025 and settle around 4.5-5 after that. That's if Mr Tariff doesn't spike inflation.
The buyer will never see their rates go higher than this in the life of the loan, and in reality, if/when rates drop again, they can refinance to a new 30 year fixed at the lower rate.
I do wonder how much of these credit card balances are people paying ~$3.50 per gallon to fill up and kit out SUVs and trucks they're paying ~$700 a month for.
As someone who strives to spend/save responsibly and drives wholly owned used cars and is still a few paychecks away from disaster, I do not understand how working/middle class people are keeping up with these costs. I notice our local Chevy dealership is also full to the brim (literally covering all of the grass on their lot) with new trucks and SUVs. I would love to better understand who is buying/leasing those vehicles and how they're keeping them on the road -- for now.
Reason being I’m in a townhouse. They do not appreciate at the same rate as single family detached and it also carries an endlessly increasing hoa fee.
Due to the hoa increases it also limits how well a property can cash flow as a rental so keeping the property as an investment is doubly less attractive as often you can forgo rental income in lieu of asset appreciation.
So how about you tell us how some of them have already done renewing at 6%+? Did bad things happen?
Edit: clarification
So I think the GP has a good point.
https://www.investopedia.com/arm-applications-grow-as-mortga...
Generally speaking people who are in mortgages are able to afford them because they're on fairly decent terms and lent to people who are capable of paying. But nobody is selling if they're going to need a new mortgage.
Yes, we understand it triggered the 2008 recession.
No, it probably won't be the canary in the coalmine for the next one.
The way in which "booming economy" phrasing is used in conversation, one would imagine that it refers to growth in GDP that has a multiplier effect in the local economy. In practice, it really just means spending is up now, but will deflate as soon as credit is harder to come by.
A lot of vacations, cars and home improvements are funded by home equity loans, not actual disposable income.
Meanwhile the average American doesn't have a spare $1500 set aside for a life threatening emergency, let alone for a Taylor Swift concert.
USD is losing value rapidly. It's amusing to see politicians claiming credit for stocks going up while the food prices are up almost as much, but nobody is responsible for this one. Dollar is down massively and downplaying this fact is only encouraging more of the same.
Have you looked at those conversions?
One June 1st 2007, 1 Argentinian Peso was worth 0.082£, today it is 0.00078£.
as well as publications leaning either direction
https://fred.stlouisfed.org/series/LES1252881600Q
To me that is the biggest reason.
Loaning based on cash instead of income is how Brex and Ramp took on Amex.
(obligatory: "commercial != consumer")
https://www.myfico.com/credit-education/whats-in-your-credit...
And "low unmployment" and not "median income vs cost of living/inflation".
https://www.newyorkfed.org/microeconomics/hhdc/background.ht...
Buying things on credit is huge because if my credit card is used fraudulently, I'm not out the money while I wait for the fraudulent charges to be reversed.
If I didn't pay with credit, then I'd be paying for everything with debit, exposing my debit card number to breaches, skimmers, and other security issues. If my debit card number gets used fraudulently, I literally lose money until I get refunded. That could be a problem if I have a rent/mortgage payment about to come out.
On a credit card, the temporary loss is not mine, it's the credit issuer. My money is safe from fraudulent use of my credit card.
The graph on this page illustrates how consumer credit card interest rates have skyrocketed, and how obscenely high it is relative to the Prime rate. https://wallethub.com/edu/cc/historical-credit-card-interest...
I seem to recall that some years back the credit card interest rates were capped at a much lower rate than they are now.
Where this would lead us shouldn't be a surprise to anyone. And at a general level, many current systems in the US are on a clearly unsustainable trajectory. However this collapses, it's going to be really messy.
I always check out the balance transfer offers I receive and use that as a gauge for how cheaply creditors are willing to extend credit. Even with the prime rate jumping up in recent years, you can still get the same 12 months at 0% interest with a 4-5% transfer fee. There was a time during the low-rate era where the average was closer to 18 months and 3% fees, whereas the last few years have leaned towards 9 months and 5%. But the variance has been pretty tame.
US Lenders being overly generous with credit isn't something that started in 2021.
Just another journalist trying to scare you. All that happened is bad debt rose 1% compared to 5 years ago.
We might be on the cusp of a collapse, but the media (and HN commentators!) continue to predict 3465 out of the last 2 recessions.
> Credit card lenders wrote off $46bn in seriously delinquent loan balances in the first nine months of 2024, up 50 per cent from the same period in the year prior and the highest level in 14 years