Shopping bags are stuffed into a car at Prime outlets on Black Friday 2018 in Lee, Massachusetts.
Ben Garver/The Berkshire Eagle via AP file
Across the U.S, credit card debt continued to climb with delinquencies rising most among young people, according to a recent report from the Federal Reserve Bank of New York.
Total credit card balances increased by $50 billion to $1.13 trillion in the fourth quarter of 2023 — the highest level since the Fed’s report started in 2003. Total household debt rose by 1.2%, compared to the previous quarter.
Serious credit card delinquencies of 90 days or more increased across all ages “notably with younger borrowers surpassing pre-pandemic levels,” according to the New York Fed, with the biggest rise among people ages 18 to 29, followed by those ages 30 to 39.
Both credit card and auto loan delinquencies are still rising above pre-pandemic levels, said Wilbert van der Klaauw, economic research advisor at the New York Fed.
“This signals increased financial stress, especially among younger and lower-income households,” he said.
One factor may be high credit card interest rates, which makes timely re-payment more difficult.
People are carrying more debt for longer periods of time at record-high interest rates, noted Ted Rossman, senior industry analyst at Bankrate, a personal finance company. The average credit card interest rate reached a new record high of 20.72% last year, up 4.42 percentage points since the beginning of 2022. That was the largest two-year increase since Bankrate’s tracking began in the mid-1980s.
Annualized, about 8.5% of credit card balances and 7.7% of auto loan balances were delinquent, said the New York Fed’s report, released Feb. 6.
For mortgages, early delinquency rates edged up 0.2 percentage point yet remain low by historic standards.
Overall delinquency rates increased slightly in fourth quarter 2023, but remain 1.6 percentage points lower than the fourth quarter of 2019.
Last quarter, delinquency rates increased for all products, except student loans. However, missed federal student loan payments will not be reported to credit bureaus until fourth quarter 2024.
Re-payment for federal student loans and interest was suspended for three years during the COVID-19 pandemic. That pause ended in October when payments were set to resume. More than 1.5 million Illinois residents cumulatively have a total of $61 million in student debt.
Rising delinquencies in the fourth quarter continued the same trend of the previous quarter, but exact reasons remain unclear.
“The labor market and the general economy have remained resilient throughout this period which makes pinning down the causes of rising delinquency rates more difficult,” said the New York Fed in November 2023, when it released its third quarter report. “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 New York Fed’s report is based on data from its Consumer Credit Panel, a nationally representative sample drawn from anonymized credit data from credit reporting agency Equifax.