When I spoke with Bank of America Delaware Market Leader Chip Rossi a few days ago, he told me, “The most important thing is that data will lead us there.” As someone who loves diving into a good report, I couldn’t help but to agree.
We were talking briefly about the larger economic picture when it comes to consumers. Interestingly enough, the Bank of America Institute conducts monthly reports based on internal data from 60 million users, and signs point that credit card spending is up 2.9% year over year in February, but that also reflects the extra leap day. In the early months of 2023, Bank of America credit and debit cards were up 5%.
The Bank of America report finds that lower-income household spending among its clients is slackening, and more than half of all U.S. consumer spending is coming from the highest earning households that bring in $120,000 or more.
That broader picture here implies that at least Bank of America clients are slowing down using their credit cards. But still, there’s one major data point that is troublesome.
It’s the cumulative credit card debt Americans hold right now – and it’s $1.13 trillion, according to the report from the Federal Reserve Bank of New York. It’s also growing. The New York Fed found that balances increased in the fourth quarter of 2023 by $50 billion.
TransUnion reports that the average borrower holds $6,360 in card debt, and the 11% interest rate hikes aren’t helping either. But it’s also driven by the high cost of living, particularly with rent or mortgage rates and groceries. TransUnion also reports that for the first time, the Millennial generation has surpassed Baby Boomers in credit card balances.
Personally, I’m stressed out when my credit card even gets close to the $1,000 range and I’m aiming to pay it off and close the account soon. If I don’t close it soon, I will lose a bet with my husband and have to forfeit my right to Dunkin’ Donuts coffee for a month. But in all seriousness, many people in my life laughed in my face when I brought up this stressor since their debt dwarfs mine by 12 or 15 times.
I’m finding as I grow more into my “elder Millennial” year that two things are true: intergenerational wealth means everything and financial education is key. Not everyone is lucky enough to have a family with a substantial nest egg. Financial education can be found anywhere online, but whether it’s good advice remains to be seen.
When I was in Shue Medill Middle School, I remember the Junior Achievement Financial Literacy program I had to compete in. There were worksheets detailing how credit card and auto loan interest rates work, briefs about the stock market and budget exercises. There was even a field trip to a mock stock exchange where my class and I were traders for a day.
Fast forward a decade and a half later, those lessons are a little hazy. And until recently, I always slow-walked paying off my debt, including my student loans. The idea of intergenerational debt frightens me enough to move it along a little faster.
When we think about all the data swirling around about economic forecasts, it’s a complicated picture that shifts with each new point. In New Castle County, the average weekly wage is $1,373, according to the U.S. Bureau of Labor Statistics, and housing expenses in the Philadelphia region averaged roughly $28,453 per year in 2022.
There’s thousands of Millennials that are struggling to make ends meet, either living with their parents for the time-being, shopping at discount grocery stores, or taking on more credit debt. Student loan payments restarted last fall, and it’s still unclear how many are delinquent because they won’t be reported to credit bureaus later this year.
The cost of living may not be coming down any time soon, and more people are relying on “pay it later” to make ends meet. Eventually, the debt will have to be paid. The question is, who will be left with the bill – and what will be left once it is?
