Lisa, a working mother earning $52,000 a year, used to have a stable financial life. In 2019, she had minimal credit card debt, an affordable car payment and no problems covering her bills. Life wasn’t perfect, but it was manageable — there was even room to save a little and enjoy the occasional night out.

Fast forward to 2025: Despite modest raises, she is juggling increased credit card balances to buy groceries and pay other bills that she used to be able to cover with cash or check, and her insurance costs have nearly doubled. Dining out is a luxury of the past. Her paycheck hasn’t stopped — but her ability to make ends meet has.

Lisa’s story is not unique. It is emblematic of a growing financial crisis quietly affecting tens of millions of Americans. While official economic headlines tout strength — low unemployment, solid consumer spending, and improving GDP — beneath the surface, I see a different economy and I am concerned. Regardless of the Federal Reserve holding rates steady this week, I see a sector-specific recession, where the financial floor is collapsing for lower- and middle-income households, and the data proves it.

Keeping the Lights On

By late last year, U.S. consumers held more than $46 billion in seriously delinquent credit card debt, the highest amount in 14 years, according to the Federal Reserve. As of the first quarter of 2025, more than 11% of credit card balances were 90-plus days past due, and short-term delinquencies were also trending upward, per New York Fed and TransUnion data.

This isn’t “over-extension” for vacations or gadgets; it’s people putting rent, gas and groceries on plastic. And then missing payments.

At the same time, subprime auto loan delinquencies hit 6.6%, the highest since tracking began in 1994, according to Fitch Ratings. Across all borrowers, auto loan delinquencies that were more than 60 days late reached 1.5% in March 2025 — surpassing Great Recession levels, according to Experian.

These are more than warning signs that the American consumer is in distress. 

An increasing number of Americans are now using Buy Now, Pay Later (BNPL) and credit cards to cover basic necessities. Grocery spending through BNPL has hit record highs — and so have default rates.

This marks a dangerous shift: not borrowing to invest or consume — but borrowing simply to survive. Many carry month-to-month balances and pay late, accumulating interest on food.

When everyday essentials require financing, financial resilience disappears. That’s not the economy of a strong consumer — it’s a silent, spreading emergency.

The high cost of getting to work

That emergency now extends to transportation. For millions, owning a car is no longer affordable. The average used vehicle loan payment is now $520 per month, while new car loans average $737 per month. This means, for those without nearly public transportation, just getting to work can take a fiscal toll.  

Since 2019, auto insurance premiums have risen by around 50% nationally, with recent year-over-year increases between 12% and 25%, varying by location. Maintenance costs, strained by aging vehicles and supply chain pressures, are up 13% year over year, and 43.6% since 2019, according to the Bureau of Labor Statistics.

With the average vehicle age at 12.8 years, unexpected breakdowns are more frequent and more expensive, especially for lower-income households that can’t absorb the shocks.

They cannot absorb the shocks because,  while prices have surged, wage growth has stalled. The average U.S. salary in 2025 stands at $66,622, with wage increases at a modest 3.9% YoY, insufficient to offset the rising cost of living. 

Here are some key cost-of-living expenses to consider: 

• Groceries cost 36.5% more than in 2019—a $100 basket of groceries then costs $137 today; 

•  Insurance premiums are up 39% to 46% since 2018: and  

•  Rent, fuel, utilities and medical costs all follow similar trajectories. 

Even households earning the median income are watching their purchasing power erode. What used to be enough, no longer is. 

And now, a new headwind is emerging. Just this week, the Federal Reserve decided to hold interest rates steady, signaling only modest cuts ahead. At the same time, Fed officials expect both inflation and unemployment to rise through year-end. This means that borrowing will remain expensive, while more Americans may face job instability—further compounding the challenge of staying current on bills, rent, and debt obligations.