Consumer debts rise, but fears of missing payments fall

NY Fed survey shows consumers confident about their financial future

Fred O. Williams
Senior Reporter
Expert on consumer credit laws and regulations.



Consumers are worrying less about being able to make their debt payments, a survey out Monday says, even though they’re loading up on debt while interest rates are rising.

People estimate their odds of missing a debt payment within three months at 11.2 percent, on average, according to the Federal Reserve Bank of New York’s Survey of Consumer Expectations for March. That’s the lowest figure recorded since September 2015.

The results come days after the Federal Reserve reported that U.S. credit card balances surpassed $1 trillion in December for the first time since the Great Recession, and continued to edge upward in February. Other types of consumer debt are growing as well.

What? We don’t worry about debt?
So why aren’t people more worried about their growing debt load?

Economic strength is giving consumers confidence that their rising debt payments will remain affordable, economists said – but at least some of that confidence could be on shaky ground.

“People’s perceptions of missing a minimum payment are driven by continued improvement in the job market, as well as the stock market,” said David Nice, economist at DS Economics in Chicago. Jobs and stocks are the economic measures that get the most news coverage, and they shape people’s perceptions the most, he said.

Strong job creation trends are holding the unemployment rate below 5 percent, and the Dow Jones average is up almost 1,000 points since Jan. 1. People see their 401(k) investments improve and feel wealthier as their nest eggs grows in value, Nice said.


Stocks, however, are notoriously fickle, and some market watchers are warning of a pullback instead of further gains. Goldman Sachs recently told investors to expect a 2 percent drop in stock prices, as the expectation of future federal tax cuts fade.

Consumers, however, remain bullish. In the survey by the Federal Reserve Bank of New York, 45 percent of them predict stocks will be even more valuable a year from now, the highest level of optimism since the survey began in 2013.

Rising rates: manageable, for now
As for interest rates, the pace of increases is manageable for consumers, economists said. The Federal Reserve has raised short-term rates one-half a percentage point since December 2016, and projections call for another half-point increase by the end of the year.

While credit cards have variable rates that rise in step with Fed increases, most mortgages and car loans have fixed rates, insulating people from the effects of a rising rate environment.

“I think interest rates are rising slowly enough that people are adjusting to them,” Nice said.

In fact, consumers in the survey saw rising rates as a positive. Forty-two percent expect to earn more on their savings a year from now, the most optimism on record.

Richard Moody, chief economist at Regions Bank in Birmingham, Alabama, said the Fed's results are in line with other measures of consumer outlook. The Conference Board's widely cited Consumer Confidence Survey index is at its highest point since December 2000, he said, as people feel good about their job security and the prospects for income growth.

As long as income keeps pace with the debt burden, the portion of people's budget going to make debt payments remains steady, he said, a key factor in how people think about debt affordability.

“While it is true debt levels are rising … and interest rates have ticked higher,” he said in an email interview, “the increases in rates we’ve seen to date have been manageable, in terms of the impact on monthly payment obligations.”

Faith in the job market was reflected in people’s high expectations of being able to find another job if they were laid off. Almost 60 percent were confident they would land on their feet, the most since the series began in 2013.

About the survey
The New York Fed’s survey of consumer expectations asks a rotating panel of 1,200 households to make predictions about prices, wages, interest rates and other pocketbook issues.

See previous survey coverage: Applications dip, credit market shows signs of cooling off


Applications dip, credit market shows signs of cooling off


Join the discussion
We encourage an active and insightful conversation among our users. Please help us keep our community civil and respectful. For your safety, do not disclose confidential or personal information such as bank account numbers or social security numbers. Anything you post may be disclosed, published, transmitted or reused.

If you are commenting using a Facebook account, your profile information may be displayed with your comment depending on your privacy settings. By leaving the 'Post to Facebook' box selected, your comment will be published to your Facebook profile in addition to the space below.

The editorial content on is not sponsored by any bank or credit card issuer. The journalists in the editorial department are separate from the company's business operations. The comments posted below are not provided, reviewed or approved by any company mentioned in our editorial content. Additionally, any companies mentioned in the content do not assume responsibility to ensure that all posts and/or questions are answered.

Weekly newsletter
Get the latest news, advice, articles and tips delivered to your inbox. It's FREE.

Updated: 03-25-2019