May 15, 2024 - Economy

Worrying sign

A line chart that shows the quarterly share of credit card balances transitioning into delinquency from Q1 2003 to Q1 2024. The percentage starts at 12.32% in Q1 2003, decreases to a low of 5.07% in Q2 2016, then increases a bit before plunging to 4.1% in Q4 2021 then soaring upwards to 8.93% in Q1 2024.
Data: New York Federal Reserve; Note: Shows share of balances where payments are at least 30 days late; Chart: Axios Visuals

An increasing share of Americans fell behind on their credit card payments at the beginning of the year, according to data out yesterday.

Why it matters: Rising credit card troubles are a sign that some consumers are feeling more financial stress — a worrying indicator for an economy that's been powered by strong consumer spending.

The big picture: It's also a bit puzzling that delinquencies are rising, hovering at rates last seen during the Great Recession, at a time when the economy is strong and unemployment rates are low.

Zoom in: New York Fed officials said they weren't sure exactly why delinquency rates were rising, but on a call with reporters, they offered a few possibilities:

  • Americans increased their spending in the pandemic period when their savings were flush — and continue to spend at elevated rates.
  • The higher delinquency rate reflects an increase over the past few years in lending to borrowers with lower credit scores (the subprime category).
  • Another possibility: As student loan payments stopped being reported to credit bureaus, some people's credit scores "artificially went up" and that could've expanded the pool of people eligible for credit cards and auto loans.

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