The percentage of credit card balances in serious delinquency (90 days or more late) climbed to its highest level since 2012, per the NYFed.
The economy has been resilient, the job market healthy, and consumers keep spending, but more Americans are becoming financially overextended, particularly on their credit cards.
New data released Tuesday by the Federal Reserve Bank of New York showed that as household debt balances grew during the first quarter, delinquencies also increased. Notably, the percentage of credit card balances in serious delinquency (90 days or more late) reached its highest level since 2012.
“In the first quarter of 2024, credit card and auto loan transition rates into serious delinquency continued to rise across all age groups,” said Joelle Scally, regional economic principal within the Household and Public Policy Research Division at the New York Fed, in a statement. “An increasing number of borrowers missed credit card payments, revealing worsening financial distress among some households.”
Aggregate delinquency rates increased during the first quarter to 3.2% of outstanding debt in some stage of delinquency, the highest since the fourth quarter of 2020, according to the New York Fed’s latest Quarterly Report on Household Debt and Credit. The transitions into delinquency — especially serious delinquency — increased across all debt types, the report said.
Delinquencies fell to historic lows during the pandemic as consumers spent less during lockdowns and were able to build up savings and pay off debt with those funds and economic stimulus payments. However, as supply chain and spending imbalances fueled domestic and global inflation — leading to a rise in interest rates — delinquencies have moved higher in recent years.
While the delinquency transition rates remain below what was seen during the Great Recession, they’re higher than pre-pandemic levels. Because of this, New York Fed researchers said they’re closely monitoring the impact on Americans’ household finances and the overall economy.
Overall household debt grew by 1.1% during the first quarter to $17.69 trillion, according to data not adjusted for inflation. The quarterly increase was driven largely by mortgage balances. Credit card balances dipped (as they typically do post-holidays) by $14 billion to $1.12 trillion. However, when adjusted for inflation, balances have yet to surpass the levels seen in 2008.
Higher balances can be attributed to population growth, an increase in online spending, the rising cost of new and used cars, as well as robust consumer activity.
