US consumers, especially lower-income, face severe financial struggles

Recent reports indicate that many American consumers, particularly those with lower incomes, are struggling financially. This situation is becoming increasingly severe, with many relying on credit cards and debt to make ends meet. Data shows that a record percentage of credit card holders are making only minimum payments. Additionally, more people are falling behind on their payments, with delinquency rates rising sharply since the pandemic's lows. The Philadelphia Federal Reserve has highlighted that revolving credit card balances have surged to record highs. In fact, credit card balances reached $645 billion in late 2024. Meanwhile, mortgage origination rates have plummeted, as high interest rates discourage new home buyers and refinancing. Despite challenges in low-income households, some luxury brands are still performing well. However, the overall financial health of consumers appears to be declining, particularly among low to middle-income groups who are becoming more cautious with their spending. A report from Bank of America revealed that credit and debit card spending per household fell by 2.3% year-over-year in February. While some sectors are still seeing spending growth, many companies are reporting slower sales and consumer behavior indicates significant pressure due to rising costs. In summary, while wealthier consumers may fare better, low to middle-income households are facing increasing financial stress. This trend could have serious implications for the economy, as consumer spending is a major driver of economic growth in the U.S. If this situation continues, it may trigger a recession as consumers struggle to keep up with rising prices and their debts.