The credit card industry is facing its most significant debt crisis in years, with many consumers now saddled with high levels of debt.
According to the latest data from Experian, nearly a quarter of U.S. consumers reported their credit card balance dropped by $100 or more since the start of 2016, up from 23 percent in 2015.
Experian says the average annual payment on a credit card fell by $1,100 to $8,600 in 2017.
The growing number of consumers with debt and the fact that many of them owe more than their income suggests the industry is headed for a crisis.
“People don’t understand the magnitude of their debt.
They’re scared of losing their jobs, they’re afraid of losing all of their savings,” said Josh Schlesinger, an attorney with the consumer watchdog consumer group Fair Debt Collection Practices.
“If you can’t pay your bills, the consequences can be very real.”
Schlesinger is an expert on credit card companies and says credit card issuers are in a race to survive as the number of Americans who are not eligible for a credit line rises.
Experians data shows that over the past five years, the average credit cardholder’s debt jumped by $7,500, or an increase of $9,200 on the year before.
Experien says that the average balance on the company’s cards fell from $5,800 to $3,500.
The increase is particularly troubling for consumers who can’t make their payments on time.
The average annual credit card delinquency rate increased by 14.7 percent, according to Experian.
The average annual debt on an average credit score rose from a low of 0.82 in 2016 to 1.27 in 2017, up nearly 6.7 percentage points.
The consumer watchdog group Consumer Federation of America says a credit score is a way to measure how likely someone is to default on their loan or credit card.
The new data is a reminder that the American public is becoming more aware of their credit score, Schleslinger said.
The Consumer Financial Protection Bureau has launched a program to help people who are having trouble paying their bills with a simple credit card application that automatically sends an email to a number from their mobile phone.
Schleslinger says people should not panic and don’t panic if their credit scores aren’t where they think they should be.
Experia says the application is free for consumers, and that people can request the application be disabled, if they don’t like the default options.
“This is a little bit of a scary time,” Schlesher said.
“We should be concerned, but we shouldn’t panic.
The American public should be more aware.”
More:Experian says credit scores are the only way to protect consumers against default, but the average debt on average credit cards rose by $5.6 billion, or 4.2 percent, in 2017 compared to the same time last year.
Schlesingers analysis of credit card data from the bureau shows the average cardholder debt is now $20,100.
Schleinger says credit score companies are scrambling to respond to the increased scrutiny from consumers, which he says is an indication that credit card consumers are becoming more wary of the debt they owe.
Scholesinger says Experian’s data shows credit card rates on average increased by almost 3 percentage points in 2017 from 2016.
“Credit card companies are trying to compensate for the increased attention to consumer credit and the heightened scrutiny of debt in general,” Schleinger said.
Schlisinger also says the data shows the industry has taken steps to prevent consumers from defaulting on their credit cards.
Experius data shows consumers are less likely to pay late fees on credit cards than they were five years ago.
Experiant said in a statement that it will continue to help consumers who have difficulty paying on their cards, and has introduced a “Payday” option that allows consumers to get a full refund for any outstanding charges.