Credit card delinquencies are increasing, according to a study by the New York Federal Reserve, which found that nearly 20% of borrowers have reached their credit limits.
A recent publication from the bank’s Center for Microeconomic Data indicates that household debt increased by $184 billion, or 1.1%, in the first quarter, totaling $17.69 trillion.
“In the first quarter of 2024, credit card and auto loan transition rates into serious delinquency continued to rise across all age groups,” Joelle Scally, regional economic principal within the household and public policy research division at the bank, said in a statement.
“An increasing number of borrowers missed credit card payments, revealing worsening financial distress among some households,” Scally added.
Despite the national credit card utilization rate holding steady at 23% for the quarter, discrepancies were evident upon closer examination of the data.
Analysis of the data showed that nearly 50% of cardholders utilized less than 20% of their available credit, while 18% used 90% or more of their credit limits, identifying these consumers as “maxed-out borrowers.”
Before the COVID-19 pandemic, fewer than 25% of the credit balances of these maxed-out borrowers became delinquent annually. This figure rose to about one-third last year.
The report also highlighted that younger consumers and those in lower-income regions are more likely to be maxed out.
The research found that aggregate delinquency rates rose during the first quarter, with 3.2 percent “of outstanding debt in some stage of delinquency at the end of March.”
“Delinquency transition rates increased for all debt types. Annualized, approximately 8.9% of credit card balances and 7.9% of auto loans transitioned into delinquency,” a release detailing the report stated. “Delinquency transition rates for mortgages increased by 0.3 percentage points yet remain low by historic standards.”