Higher interest rates increase default risk, as they raise the cost of debt servicing for the borrower, and I believe that that is what is happening.
It would be unbelievable if banks did not know that. The question being, for how long interest rates are going to stay at current levels?
" Average APR for new credit offers is 24.92% (as of August 9, 2024) Existing credit card accounts have an average APR of 21.51% (as of August 9, 2024) Federal Reserve actions significantly affect credit card interest rates."
The problem here is that for most of the posters posting in this forum, and that since I can remember, the collapse of the USA economy is just around the corner. This notion is always based upon the principle that Government intervention, be it through fiscal or monetary policy, has to cause huge distortions because for the Austrians the natural rate of interest, the rate that reflects the time preferences of market participants and allocates resources among the temporally defined stages of production, can only be determined by a free market.
Therefore, an increase in credit card delinquency has to be a signal of the tempest that is about to come.
