Macy’s reports a spike in credit card delinquencies as American household debt hits $1 trillion thanks to rampant inflation and higher interest rates

Macy’s executives warned of a surge in customers not making credit card payments due to unprecedented pressure on household finances.

The department store has seen its credit card revenue fall 36 percent this year due to rising delinquencies.

Bosses said they expected a spike in defaults post-pandemic, but that trend has come “faster than planned”.

This comes after Fed figures showed America’s credit card debt had climbed to $1 trillion for the first time in history.

In a conference call on the results, Adrian Mitchell, Macy’s chief operating officer and chief finance officer, said, “The speed at which the increase has occurred for us and for the entire credit card industry was more quickly planned.”

Macy’s executives have warned of a surge in customers not making their credit card payments

He added that the problem “accelerated” in June and July — as the company prepares for a spike in “bad debt” on its credit card portfolio.

“I think the credit card revenue is an indication of the pressure that we’re actually seeing on the consumer,” Mitchell said.

“This is about credit card balances, this is about student loans, which we know are going to be a focus in the next month or two, auto loans, mortgages.”

Household budgets are being weighed down by rampant inflation and high interest rates, which currently range between 5.25 and 5.5 percent – the highest since 2001.

According to the Fed, this caused credit card balances to increase by $45 billion overall in the second quarter of the year.

A volatile few years followed for America’s personal finances as credit card debt plummeted during the pandemic as lockdown curbed spending.

Between the last quarter of 2019 and the second quarter of 2020, card balances fell from $927 billion to $817 billion — a decrease of 11 percent. And in the first quarter of 2021, they fell even further to $770 billion.

Since then, households have been under unprecedented financial pressure from rising inflation and subsequent rate hikes by the Fed.

Annual inflation has slowed from a peak of 9.1 percent last summer, falling to 3 percent in June before rising slightly to 3.2 percent in July.

Federal Reserve data shows America’s credit card debt has surpassed $1 trillion for the first time in history

To contain the crisis, the Fed has repeatedly hiked interest rates, driving up the cost of mortgages and credit card borrowing.

In July, officials hiked interest rates by a quarter of a point, taking benchmark borrowing costs to their highest levels in more than two decades.

As a result, mortgage interest rates rose to over 7 percent.

This added pressure has forced households to take extreme measures to cover their spending.

Earlier this month, a Bank of America report revealed that the number of workers taking “emergency withdrawals” from their 401(K) applications rose 36 percent.

And according to the latest Fed data, there are 578.35 million credit card accounts in the US. That’s an increase of 5.48 million from the end of last year.

According to Bankrate, the average interest rate on credit card balances is also near a record 20.53 percent.