U.S. Household Debt Crisis Looms as Late Payments Surge Across Credit Types

Buy-Now-Pay-Later Delinquencies Hit Record High

Nearly half of U.S. households using buy now, pay later (BNPL) services—offered by companies like Affirm and Klarna—missed at least one monthly payment in the past year, according to a Lending Tree report released last week. This marks an increase from 41% the prior year, highlighting growing financial strain among American families.

Credit Card Debt and Student Loans Add to the Burden

In March, the Century Foundation found that half of credit card holders could not pay their full balances monthly, collectively carrying $1 trillion in credit card debt. Additionally, a FICO Credit Score report from last month revealed that 11% of federal student loan borrowers were at least three months delinquent—two years after the Biden administration’s repayment pause ended.

Auto Loans and Mortgages Face Rising Delinquencies

Families are also falling behind on auto loans and mortgages, losing the financial relief provided by COVID-era payment programs. The average new car now costs $50,000, with monthly payments around $775. Used car prices recently hit their highest level since summer 2023, forcing more households to rely on credit to cover essential expenses.

Economic Pressures Drive Households to Borrow

Mike Pierce, co-author of the Century Foundation report and executive director of Protect Borrowers, warned that financial stability is eroding. "Finances are brittle," Pierce said. "Families feel like they’re operating without a net, and the data confirms they’re leveraged in ways not seen in recent memory."

Pierce attributed the crisis to high prices and interest rates: "Stuff’s too expensive. People are turning to debt to cover routine expenses they once paid in cash, and that’s causing spillover effects across all consumer credit."

Key Takeaways:

• 49% of BNPL users missed payments in the past year (up from 41% in 2023).
• 50% of credit card holders carry unpaid balances, totaling $1 trillion in debt.
• 11% of student loan borrowers are three months or more delinquent.
• New car prices average $50,000, with monthly payments near $775.
• Used car prices hit 2023 highs, forcing more reliance on credit.

"Families feel like they’re operating without a net, and the data confirms they’re leveraged in ways not seen in recent memory." — Mike Pierce, Executive Director, Protect Borrowers

Is a U.S. Debt Crisis Imminent?

The data suggests mounting financial stress, with households prioritizing essential payments like mortgages and auto loans but struggling to cover rising costs for groceries and other necessities. As inflation and interest rates remain high, the risk of a broader debt crisis grows.