Credit Card and Auto Loan Delinquencies Continue Rising; Notably Among Younger Borrowers (2024)

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Why are credit card delinquencies rising? ›

“But since early 2021, credit card balances have rocketed upward by 48%, fueled by a post-pandemic boom in services spending as well as high inflation and high interest rates,” he said.

By the numbers: Roughly 8% of auto loan balances were newly delinquent in the second quarter, with payments at least 30 days late. That is roughly flat relative to the start of 2024. The story looks similar for credit card balances, which edged up by 0.1 percentage point from the second quarter.

“Credit card and auto loan transitions into delinquency 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.”

The share of credit card debt that's severely delinquent, defined as being more than 90 days overdue, rose to 10.7% during the first quarter of 2024, according to the Federal Reserve Bank of New York. A year ago, just 8.2% of credit card debt was severely delinquent.

The agency said rising APR margins are driving people into persistent debt and delinquency. “Credit card companies are gouging consumers with record high APR margins, which sit on top of the Fed's already high interest rates.

The Federal Reserve does not determine auto loan rates, but it does determine the rate at which banks can borrow federal funds. Due to that, it influences the rates banks then charge customers for loans, including ones on cars. In addition, inflation pushes vehicle sticker prices higher.

Data from the Federal Reserve Bank of New York's latest quarterly tracking of American households' levels of indebtedness, also revealed that 4.4% of Americans' outstanding auto loan debt is in "serious delinquency."

If a loan installment recovery is not on time, it arises credit risk due to loan delinquency. Delinquent loan does not generate income but it increases expenses such as loan loss provision, recovery cost, and other costs. An institution must lose opportunity cost due to loan delinquency.

Creditors might charge you a late payment fee once your account is delinquent. They can also take other actions if you leave the bill past due for too long. For example, once you're at least 30 days past due, the creditor might report your late payment to the credit bureaus, which can hurt your credit scores.

Are people falling behind on credit card payments? ›

Around 9.1% of credit-card balances turned delinquent over the past year, the highest rate in over a decade, according to an August report from the Federal Reserve Bank of New York.

Credit card delinquency occurs when you miss a credit card payment, although a single case of delinquency isn't typically a big deal to your issuer if you talk to them about it. Multiple missed payments, however, can cause your issuer to apply penalty APRs and late payment fees, pushing you further into debt.

For the poorest 10% of ZIP codes, the delinquency rate increased from 14.9% in the third quarter of 2022 to 21% in the first quarter of 2024, or 41% in relative terms. SOURCES: Federal Reserve Bank of New York/Equifax Consumer Credit Panel and authors' calculations.

The largest increase in delinquencies has been for credit cards, up from 4.1% during Q4 2021 to 8.9% by Q1 2024. Auto loan delinquencies went up from 4.9% to 7.9% during the same time. The average delinquency rate for credit cards during the pre-pandemic period was 6.2% while that for auto loans was 7.2%.

According to the most recent delinquency data from the Fed, the 30-day delinquency rate (or the percentage of total outstanding credit card balances currently at least 30 days overdue) rose from 3.15% in the first quarter of 2024 to 3.25% in the second quarter.

Because your minimum payment is based on your interest rate and current balance, when those increase, whether from additional purchases or from fees or interest, your minimum may also go up.

Just 3.25% of Americans' total outstanding credit card balances are currently at least 30 days delinquent.

Global card losses attributed to fraud reached $33 billion in 2022, according to payments industry research company Nilson Report, with the U.S. market representing roughly 40% of losses. It has forecast a persistent threat that could reach nearly $400 billion in card fraud in the decade to 2032.