Americans are growing more concerned about missing debt payments and entering delinquency as high prices and interest rates weigh on borrowers.

New survey data from the Federal Reserve Bank of New York showed a decreasing level of confidence among consumers in their ability to make the minimum debt payments for loans and credit cards.

In August, the average perceived probability of missing a payment over the next three months was 13.6%. That was the highest reading in over four years. It’s also an increase from 11.1% a year ago and 13.3% a month ago.

According to a separate release of Federal Reserve data on Tuesday, total consumer debt increased by $25.5 billion month over month, which was the largest increase since November 2022.

Young Americans seem to be in the worst shape as far as keeping up with their debt payments. Here are consumers’ perceived probabilities of missing a payment in the next three months, broken down by age:

Under 40: 18.51%
Ages 40 to 60: 15.01%
Over 60: 8.55%

The survey also found that many people with lower incomes are at risk of missing payments. Among those earning less than $50,000, the perceived chances of missing a payment are nearly 20%, according to the New York Fed.

People earning over $100,000 have a better grip on their debt obligations, with only a 6.4% chance of missing a payment.

Consumers have mixed economic expectations

In addition to looking at debt, the New York Fed’s survey takes the pulse of consumer expectations on other topics, including inflation and the job market.

Even though inflation has largely cooled, it’s still on the minds of many Americans. Elevated goods and services prices are challenging budgets — likely part of the reason that consumers are worried about keeping up with their debt payments.

Americans said they expect prices in the economy to rise between 2.5% and 3% annually over the next 1 to 5 years. That’s roughly in line with the current rate of inflation — 2.9% as of July — and would be an improvement from the much-higher rates observed in 2022 through the first half of last year.

Consumers said they expect their earnings to grow at a rate of 2.9% over the next year, but they also expect their household spending to increase 5%.

What to do if you can’t afford a minimum debt payment

Borrowers should avoid missing minimum payments at all costs. If you don’t pay a loan or a credit card, your credit score will likely take a major hit, and your account could go to collections.

If you’re facing a temporary financial hardship, communicate with your lender and see if they can offer you any flexibility to pay at a later time.

Credit card minimum payments are often only $25 to $50 per month. It’s crucial to make that payment even if you can’t pay your full balance, or else you’ll face late fees and hurt your credit.

Personal loans and other lending options could help you afford your payments in a pinch, but taking on more debt is likely not a long-term solution to your problems. Budgeting, growing your income and building up an emergency fund can help you get to a sustainable financial situation.

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According to a report from The Money.com, a recent survey by the Federal Reserve Bank of New York has shown that Americans are becoming increasingly worried about missing debt payments. This is due to the rising prices and interest rates that are making it difficult for borrowers to keep up with their payments. The survey also found that younger Americans and those with lower incomes are at a higher risk of missing payments.

In August, the average perceived probability of missing a payment over the next three months was 13.6%, the highest reading in over four years. This is an increase from 11.1% a year ago and 13.3% a month ago. The survey also revealed that total consumer debt increased by $25.5 billion in the month of August, the largest increase since November 2022.

The survey also looked at consumer expectations on other economic factors such as inflation and the job market. Despite inflation cooling down, it is still a major concern for many Americans. Consumers expect prices to rise between 2.5% and 3% annually over the next 1 to 5 years, which is in line with the current rate of inflation. However, they also expect their household spending to increase by 5%, which could make it even more difficult to keep up with debt payments.

If you are struggling to make minimum debt payments, it is important to communicate with your lender and see if they can offer any flexibility. Missing payments can have a major impact on your credit score and could lead to additional fees and penalties. It is crucial to make at least the minimum payment, even if you cannot pay the full balance. 

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