Credit card debt, personal bankruptcies rising in Minnesota
MINNEAPOLIS — Americans are struggling to keep up with their credit card payments and personal bankruptcies are rising — and it's starting to worry economists.
"People aren't financing purchases at 20% interest because everything's wonderful. That's a clear sign of strain," said Greg McBride, chief financial analyst for Bankrate.
McBride is among those closely watching the current rise in household debt. Credit card debt increased by $143 billion during the final quarter of 2023, compared to the year before.
"Inflation has raised household expenses 20-25% sometimes more just over the last three or four years, while income may not have kept up with that," he said. "And so you have more households that have either run down their savings or are now running up debt in an effort to bridge that gap."
The amount of new debt isn't the only concern. Delinquencies and personal bankruptcies are also up in Minnesota, with 6.65% of Minnesotans behind on their credit card payments. In Wisconsin, the delinquency rate is 6.43%.
The good news is those rates are among the lowest in the country, but still our highest since 2012.
State court documents show 731 bankruptcies were filed in March 2024, the largest number since the start of the COVID-19 pandemic in March 2020.
Bankruptcy attorney Tim Theisen says many delinquencies, and the bankruptcies that often follow, were delayed by the stimulus and other protections from the Cares Act.
"A lot of people rode that out as well as the moratoria on foreclosures and evictions and student loan payments, where that's all starting to come back," Theisen said.
Theisen says people wait too long to file bankruptcy, which hinders a fresh start.
"People think of bankruptcy as a last resort. They struggle. Sometimes they look at out-of-state, for-profit debt relief agencies, which usually turns out to be a bit of a train wreck," he said.
McBride recommends moving high-interest credit debt to a card with 0% APR, or as low as you can find.
"Be sure to shop around, look for low-rate balance transfer offers so you can give yourself a runway to get it paid off once and for all," McBride said.
Make sure to check the fees for transferring a balance from one credit card to another.
There are nonprofit debt relief services that can help. You may also get short-term relief by reaching out to your credit card company. They often provide hardship programs.