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Credit card balances and delinquency rates among non-prime
borrowers--people with credit scores below 660--increased by the
greatest percentage since early 2021, when inflation began to
rise significantly. If high inflation persists, the study
projected delinquencies could rise to about 8.4% of total credit
card loans by the first quarter 2023, up from 8% in the first
quarter this year.
The findings show that despite most consumers being in good
financial standing thanks to robust government stimulus and wage
growth, consumers with the least financial cushion are
increasingly vulnerable to price shocks caused by inflation.
"Despite everything that has happened in the last two years, the
consumer is in extremely good shape, but not all of them," said
Charlie Wise, head of global research and consulting at
TransUnion. "Averages gloss over the fact that some are
struggling."
The Federal Reserve on Wednesday is expected to raise interest
rates by half a percentage point as part of its effort to combat
high inflation, a move that will have knock-on effects for
credit card borrowers because it will increase borrowing rates.
While credit card delinquency rates remain below pre-pandemic
levels for non-prime borrowers, the study found these consumers
are also carrying a heavier debt burden month-to-month than in
the past two years.
The average non-mortgage debt balance per non-prime consumer in
the first quarter of 2022 was $22,988. That is up from $22,461
in the first quarter 2021, and also up from $22,970 in the first
quarter 2020, before the pandemic began in the United States.
(Reporting by Elizabeth Dilts Marshall; Editing by Nick
Zieminski)
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