A new sign emerged this week showing the number of borrowers maxing out personal credit cards remains high, with delinquency rates on the rise, and younger borrowers particularly stretched.
Banks have signaled during recent shareholder earnings calls that their credit-card segments have weathered the worst of delinquencies. New industry-wide data from the Federal Reserve Bank of New York warns that defaults have likely not yet peaked.
According to the Fed, U.S. credit card balances stood at $1.12 trillion in the first quarter of this year, which was down slightly from the end of last year due to seasonality. Still, the balance total sticking above $1 trillion has captured attention. The figure cleared the $1 trillion mark for the first time ever in the second quarter of 2023.
Additionally, the Fed’s report showed that the percentage of credit card balances that fell into delinquency rose to nearly 9% last quarter, a rate not seen in more than a decade. High balances and rising delinquency rates during a period of relative economic strength and tight employment raise potential red flags for economists and policymakers.
“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 at the New York Fed’s Household and Public Policy Research Division.
“An increasing number of borrowers missed credit card payments, revealing worsening financial distres
