Credit Card Losses Set to Soar, Goldman Sachs Warns

Goldman Sachs is warning that credit card losses are set to soar through the end of 2024 or early 2025, as consumers struggle to keep up with rising inflation and interest rates.

The investment bank predicts that credit card losses could rise to 4.93% by the end of that period, up from the current level of 3.63%. This would be the highest level of credit card losses since the Great Recession.

Credit Card Losses Set to Soar, Goldman Sachs Warns

Goldman Sachs' warning comes as the Federal Reserve is aggressively raising interest rates in an effort to combat inflation. The Fed has already raised rates by 3 percentage points this year, and it is expected to continue raising rates in the coming months.

Rising interest rates are making it more expensive for borrowers to carry debt, and this is expected to lead to an increase in credit card defaults. In addition, high inflation is eroding consumers' purchasing power and making it more difficult for them to make ends meet.

The rise in credit card losses is a concern for both borrowers and lenders. For borrowers, it means that they are more likely to have their credit cards charged off or to be sued by creditors. For lenders, it means that they are losing more money on bad loans.

What can borrowers do to avoid credit card defaults?

If you are struggling to keep up with your credit card payments, there are a number of things you can do to avoid default:

• Make a budget and track your spending. This will help you to identify where your money is going and to make sure that you are spending less than you earn.

• Prioritize your debt payments. Make sure to make at least the minimum payment on all of your credit cards each month. If you can, try to pay more than the minimum on your highest-interest credit cards.

• Consider a debt consolidation loan. If you have multiple credit cards with high interest rates, you may be able to save money by consolidating your debt into a single loan with a lower interest rate.

• Talk to your creditors. If you are struggling to make your payments, contact your creditors to see if they are willing to work with you. They may be willing to lower your interest rate or to create a payment plan that works for your budget.

What are lenders doing to address the rise in credit card losses?

Lenders are taking a number of steps to address the rise in credit card losses. One is that they are becoming more selective in who they issue credit cards to. They are also tightening their underwriting standards and requiring higher credit scores for new borrowers.

In addition, lenders are offering more credit card assistance programs to borrowers who are struggling to make their payments. These programs may include lowering interest rates, creating payment plans, and waiving late fees.

Conclusion

The rise in credit card losses is a concern for both borrowers and lenders. Borrowers should take steps to avoid default, such as making a budget, prioritizing their debt payments, and talking to their creditors if they are struggling to make their payments. Lenders are also taking steps to address the rise in losses, such as becoming more selective in who they issue credit cards to and offering more assistance programs to borrowers who are struggling to make their payments.