Tax refunds and stimulus checks are meant to be used to pay off debt like credit card debt. However, experts now speculate that the checks might have been spent on other things – a sign that the average American is struggling on a day-by-day basis.
Delinquency rates have jumped to 11% in the first quarter compared to last year. Delinquency rate is the ratio of borrowers who are 90-days or more delinquent on their credit cards.
“This increase could be an indication that tax refund checks, typically used to pay down balances in during the first quarter in years past, are now being used to cover daily living expenses,” said Ezra Becker, of TransUnion’s financial services group.
Credit card companies and financial services have also hike rates up and some introduced hidden fees on delinquent borrowers.
Job loss data showed signs of decline for May but many Americans displaced from their jobs are struggling to find replacement jobs. With no real sources of income, households are defaulting back to their credit cards in order to make ends meet.
Source: CNN
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