Nearly 9% of credit card holders who were formerly current on their payments fell into delinquency during the first quarter of 2024, a level not seen since 2011, according to a report released Tuesday from the Federal Reserve Bank of New York.
The delinquencies seem to be a matter of not having the cash to pay the credit card bills, rather than having forgotten to do so, because those who have fallen behind on payments are more likely to have also reached their card’s credit limit. Separate reports point toward higher interest rates and cost of living due to inflation as potential reasons why borrowers may be having a harder time managing their debt. The average credit card interest rate, as of February, was 21.6%, the highest since at least 1995.
Millennials and Gen Z consumers, along with lower-income borrowers, are more likely to have more credit debt, and those with higher utilization rates are more likely to become delinquent. Around a third of credit card users who have spent 90% of their credit card limits were behind on payments over the past year.
“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. “An increasing number of borrowers missed credit card payments, revealing worsening financial distress among some households.”
