Americans Are Financially Stressed. Can Fintech and Wealthtech Fix That?
Plus, the latest crypto mystery.
Number of the Week: $12 million (explanation below)
Americans Are Financially Stressed. Can Fintech and Wealthtech Fix That?
Americans’ credit card debt hit a staggering $1.03 trillion in the second quarter. More than a third of Americans report carrying close to or at their highest-ever debt level. Outside of mortgages, credit cards account for more than double any other single source of personal debt, according to findings from a new Northwestern Mutual study. Of those who carry personal debt, 30% of their monthly income goes toward paying it off; most also expect to remain in debt for years.
The popularity of services such as Buy Now, Pay Later—projected to be a $9.2 billion market in the U.S. by 2030, with a compound annual growth rate of 24.3% from 2023 to 2030—is making matters worse for some borrowers. A Consumer Financial Protection Bureau report found that “BNPL borrowers were, on average, more likely to be highly indebted, with revolving balances on their credit cards, delinquencies in traditional credit products, and more prone to use high-interest financial services.”
While New York Federal Reserve Bank economists maintain there is “little evidence of widespread financial distress for consumers” on the credit front in spite of economic headwinds over the past year, a deeper look at U.S. household finances—savings, debt, retirement savings and investments—paints a more pessimistic picture, reflecting an overall financial state for a majority of Americans that is unsettling. Consider that:
U.S. credit card delinquencies are at an 11-year high using a four-quarter average.
The median savings balance for U.S. households is $5,300, and only 63% of Americans have enough cash or available equivalent to cover a $400 emergency (the latter figure, however, marks an improvement from 50% of Americans a decade ago).
Sixty percent (60%) of adults live paycheck to paycheck; of those, four in 10 are considered high-income earners.
Real median U.S. household income is $70,784, and varies by race, ethnicity, gender and geography.
Total student loan debt in the U.S. is $1.77 trillion, including federal and private loans (federal student loan repayments are set to resume this fall).
The median retirement savings account for Americans is $65,000, but many have far less or none.
Mortgage balances hit $12.01 trillion, with a “modest increase” of $393 billion in newly originated mortgage debt in Q2 (The more important number: The average age of first-time homebuyers rose to 36 in 2022, up from 33 a year earlier, delaying a critical step in building wealth over the long term).
Auto loan balances hit $1.6 trillion, up by $20 billion in Q2.