Credit Card Delinquencies Return to Pre-Pandemic Levels

During the Covid-19 pandemic, delinquency rates for all kinds of consumer debt in the United States reached historic lows, as generous stimulus checks lined Americans' pockets while spending opportunities were severely restricted at the same time. Since bottoming out in 2021, the percentage of balances transitioning into delinquency, i.e. becoming 30 or more days late on a payment, has crept up for all types of consumer credit except student loans, which were covered by forbearance until recently. Credit card delinquency transitions in particular have risen over the past 12 months and are now exceeding pre-pandemic levels.

According to the New York Fed, 2.0 percent of credit card borrowers have fallen behind on a payment in the third quarter of 2023, up from 1.2 percent in Q3 2021 and from 1.7 percent in the third quarter of 2019. Looking at different age groups, it's younger consumers who are most likely to miss the deadline for paying their credit card bill, while Baby Boomers are least likely to fall behind on their payments.

As the following chart shows, delinquency transition rates have returned to pre-pandemic levels - as measured here by the 2015-2019 average - or even exceed them, as is the case for Millennials. According to a blog post published alongside the latest report on household debt and credit, it's hard to pin down the causes for rising delinquency rates, especially in light of the resilient labor market. "Whether this is a consequence of shifts in lending, overextension or deeper economic distress associated with higher borrowing costs and price pressures is an important topic for further research," the authors conclude.