Americans struggled to pay off credit-card debt at the end of 2018, and 37 million accounts were seriously delinquent

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  • About 37 million credit-card accounts were 90 or more days past due in the fourth quarter.
  • While overall consumer delinquency rates remain relatively low, their steady rise poses risks to certain populations.
  • Nearly a third of credit-card debt is held by those 60 or older, for example.

At the end of 2018, Americans struggled to make payments on the country’s $US870 billion worth of credit card debt.

About 37 million credit card accounts fell into serious delinquency in the fourth quarter, meaning they were 90 or more days past due. While delinquency rates overall remain relatively low, economists say the steady increase among credit-card users poses risks to certain populations.

Nearly a third of credit-card debt is held by those 60 or older, for example, while young Americans are facing historic levels of student debt.

That could be particularly concerning because some of the oldest and youngest borrowers may be financially dependent on family members, according to Josh Wright, the chief economist at iCIMS and a former Federal Reserve staffer.

“This tells us that if the expected economic slowdown gets serious, these are the groups that will pose the biggest threat to the economy,” he said.

While the unemployment rate has remained near decade lows and wage growth appears to be picking up, the economy is expected to slow in the US and elsewhere.

Credit-card balances have been steadily slipping into serious delinquency territory since 2017, according the the Federal Reserve. A record number of Americans also have auto loans that are 90 days past due.

“The substantial and growing number of distressed borrowers suggests that not all Americans have benefited from the strong labour market and warrants continued monitoring and analysis of this sector,” economists Andrew Haughwout, Donghoon Lee, Joelle Scally, and Wilbert van der Klaauw wrote in a report out last month.

Rising delinquency levels pose risks to consumer spending, which accounts for more than two-thirds of economic activity. The cost of servicing debt remains historically low, however, with the debt service ratio for consumer credit unchanged at 5.58 in the third quarter.

Some Americans could be falling behind on loans they secured when credit regulations were less strict, according to Ryan Sweet, an economist at Moody’s Analytics. But against a backdrop of fading stimulus, he doesn’t see rising delinquency rates as a major cause for concern.

“As this expansion continues to age and because we’ve had some loosening in lending standards, you’re going to see credit quality weaken some,” he said. “But I don’t think this is any indication that there are any fault lines developing for the consumer or the broader economy.”

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