Understanding consumer credit trends is essential for all businesses that rely on credit to drive growth. After all, changes in consumer credit can signal broader changes in spending patterns that could have a material impact on your business. With that in mind, let’s take a look at some of the key consumer credit trends to keep an eye on in 2023.
More Americans are falling behind on their credit card payments
One of the most notable consumer credit trends taking place right now is an increase in the number of Americans falling behind on their credit card payments. According to the latest data from the Federal Reserve Bank of New York, U.S. credit card debt hit a record $930 billion with younger Americans having the highest delinquency rate.
There are a few potential reasons for this trend. First, many Americans are still struggling to make ends meet in the wake of the recession, and as a result, they’re resorting to using their credit cards more often just to cover basic expenses. Second, interest rates on credit cards have been rising steadily over the past year, making it more difficult for consumers to keep up with their monthly payments. Finally, many Americans are simply carrying more debt than they can handle, and as a result, they’re more likely to fall behind on their payments.
Consumers are taking out more personal loans.
Another consumer credit trend worth watching is the rapid growth in personal loan borrowing. According to data from Experian, the number of personal loan accounts has increased by 16% to 25.1 million over the past year.
What’s more, personal loans have become much more accessible in recent years thanks to the rise of online lenders. These lenders have made it easy for consumers to apply for and receive personal loans with just a few clicks of a button, which has further fueled the growth in personal loan borrowing.
Auto loan delinquencies are rising.
Although overall delinquency rates remain near record lows, there is one area of concern: auto loans.
According to forecasts from TransUnion, for auto loans “the percentage of borrowers who are 60 or more days past due will climb to 1.95% in the fourth quarter, then drop to 1.9% by the end of next year”. However, despite consumers struggling to make payments, the demands for cars will remain strong and the auto loan market conditions healthy.
Despite some mixed signals, the data paints a fairly clear picture of what’s happening in consumer credit today: more Americans are falling behind on their debt payments. This is especially true for credit cards and auto loans. If your business relies on these forms of payment from consumers, you may start to see an increase in delinquencies. First Credit Services can help you manage accounts receivables and recover any debts that do become delinquent. Have you seen changes in how consumers are paying your business? Contact us to learn more about how we can help you weather this storm.
Read More Why You Should Consider Hiring a Collection Agency for Auto Loan Delinquencies