Credit card defaults are rising

The default rate is headed the wrong way, rising to 3.7% in June. 

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Going the wrong way.
Welcome to the Know the Difference Minute for Tuesday, August 8th.
One of the data releases from the Federal Reserve covers trends in credit card debt. Revolving credit, which is mostly credit card debt, increased 4.5% during the first half of the year. Thankfully, disposable incomes have also gone up close to that amount.
However, stepping back a bit, incomes have increased 8% over the last 12 months, but credit card balances have increased more than 11%.
And it’s pricey debt. As of May, the average interest rate on credit cards was more than 20%.
Defaults occur when people don’t pay their bill. According to the S&P/Experian Consumer credit default index, a growing percentage of those account balances are falling into default. It’s below its average going back to 2004, but the default rate is headed the wrong way, rising to 3.7% in June. It’s a worrying trend that merits monitoring.
I’m Brian Jacobsen, Chief Economist at Annex Wealth Management. That is your Know the Difference Minute.