American Debt Stings Like Never Before in New Era for Households

After years of managing household budgets through the stress of the worst inflation in a generation, US families are increasingly pressured by a different kind of financial squeeze: The cost of carrying debt.

Two years after the Federal Reserve began hiking interest rates to tame prices, delinquency rates on credit cards and auto loans are the highest in more than a decade. For the first time on record, interest payments on those and other non-mortgage debts are as big a financial burden for US households as mortgage interest payments.

Interest Payments by US Households

The figures suggest a difficult reality for the millions of consumers who are the engine of the US economy: The era of high borrowing costs — however necessary to slow price increases — has a sting of its own that many families may feel for years to come, especially the ones that haven’t locked in cheap home loans. And the Fed, which meets next week for a policy decision, doesn’t appear poised to cut rates until later in 2024.

As monthly debt payments take up more of workers’ paychecks, those consumers are more exposed to potential economic contractions.