America Has a Credit Card Problem
Lower interest rates can't come soon enough for the average American...
Markets heaved a sigh of relief late last week when Federal Reserve Chair Jerome Powell hinted at a possible interest-rate cut in the near future. Powell, who has been cautious about cutting rates too soon, had this to say at the Fed's annual conference in Jackson Hole, Wyoming...
The stability of the unemployment rate and other labor market measures allows us to proceed carefully as we consider changes to our policy stance. Nonetheless, with policy in restrictive territory, the baseline outlook and the shifting balance of risks may warrant adjusting our policy stance.
The "may warrant adjusting" is the key phrase investors lasered in on. According to prediction market Polymarket, the odds of a rate cut in September are now 80%.
As a result, stocks soared. Many major stocks are even trading around 52-week highs.
I agree that it's about time rates were lowered. You see, many Americans are struggling to pay their bills...
First, with the Department of Education resuming collection of defaulted student-loan payments in May, the percentage of loans that are 90-plus days delinquent just jumped to 10.2%... Additionally, student-loan debt for U.S. households ate up roughly 7.3 % of total disposable income, according to the most recent data. For context, that number was only 3% in 2003.
More importantly, folks are having a tough time paying off their credit cards with higher interest rates.
Credit card delinquencies just hit 12.3% in the second quarter. We haven't seen this high a delinquency rate in more than a decade – since the first quarter of 2011.
In fact, the current delinquency rate is not too far off the high seen during the 2008 financial crisis. Take a look...
Data from loan marketplace LendingTree tells us that one in four lenders have used debt to buy groceries... And the youngest consumers (age 18 to 29) reportedly make up the biggest portion of folks who are 90-plus days delinquent.
It's also troublesome that we're seeing auto-loan delinquencies hitting 5% when the previous high was 5.4% at the end of 2010. (It's easier to not make payments on credit cards and student loans than on auto loans... You likely use your car every day, and a missed payment can result in repossession.)
The delinquency rate for mortgages has moved from 0.44% two years ago to 0.88%. Still, anything below 1% is historically low. And this is the good news... It shows we're not on the eve of another mega-recession like in 2008.
But overall, it's clear that higher interest rates have taken their toll on consumers. The average interest rate for new credit cards is 24.4% this month, a massive number.
It's no wonder that the market cheered the change in language from the Fed. Lower interest rates will go a long way to help U.S. consumers dig themselves out of this hole.
Unfortunately, even with interest rates projected to be lowered, excessive borrowers will face a day of reckoning. Still, it's never too late to turn your financial situation around or become more informed about the economy.
That's where my friend and colleague Marc Chaikin comes in...
The 50-year Wall Street veteran went on camera yesterday to answer questions from everyday people like you. Receiving more than 1,000 submissions, he zeroed in on the most popular topics on folks' minds today – including interest rates and the markets.
What We're Reading...
- Something different: Man finds his wife's lost wedding rings after searching through landfill.
Here's to our health, wealth, and a great retirement,
Dr. David Eifrig and the Health & Wealth Bulletin Research Team
August 27, 2025