During an interview with the Fox Business Network on Wednesday, Treasury Secretary Janet Yellen answered a question on record credit card spending by stating that we still have strong credit quality and delinquencies have gone up a small amount from a historically low level and while “particularly lower-income households are borrowing again on credit cards. I see that as a normalization, rather than a disturbing new trend.”
Fox Business White House Correspondent Edward Lawrence asked, [relevant exchange begins around 4:05] “Last year, many economists predicted a recession this year. We haven’t seen it. It looks like we may not see one this year. The consumer is spending record amounts on credit card[s] in order to just survive, for basic things. They can’t afford basic items. How long do you think this credit card debt accumulation can continue?”
Yellen answered, “Well, credit quality remains excellent and charge-off rates, delinquencies have moved up slightly, but from historically low levels. Most households, even including the lowest-income households, saw their overall financial position improve during the pandemic. Their average level of cash balances went up. Their overall finances improved. Now, over time, they have spent some of that buffer of savings, and particularly lower-income households are borrowing again on credit cards. I see that as a normalization, rather than a disturbing new trend.”
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