The Federal Reserve Bank of New York released its Q2 2024 consumer debt report, revealing a $111 billion increase in credit card debt compared to last year.
Researchers from the NY Fed told CNBC that credit card delinquencies have also risen, particularly among adults ages 18 to 39. The Federal Reserve attributed this increase to the pandemic, which forced many younger adults to overextend themselves financially.
“When you look at three credit card metrics, it is easy to see that consumer households feel the pain of continued stress from interest rates and inflation,” said Brian Riley, Director of Credit and Co-Head of Payments at Javelin Strategy & Research. “The latest NY Fed study indicates credit card debt climbed $27 billion from Q1 to Q2 2024, up 5.8%. That increase is concerning unto itself, but when you add in rising delinquencies, the number becomes more revealing.”
Seriously Overdue
The NY Fed’s researchers noted that delinquent borrowers are often renters with shorter credit histories and lower credit limits, which increases their chance of missing a credit card payment. Those who missed a payment most cited job loss or reduced income as contributing factors.
“On a year-over-year basis, the number of accounts in serious delinquency, defined as those 90+ days past due, surged from 5.08% of receivables to a worrying 7.18%, representing a substantial 41.3% increase,” Riley said. “This means that a significant portion of credit card debt, 7 out of every 100, is seriously overdue.”
Looming Credit Risk
Intensifying these issues are credit card annual percentage rates nearing all-time highs and inaccuracies in credit scoring, which have allowed some consumers to obtain credit products they aren’t qualified for.
“The more concerning issue is that credit card lenders keep increasing credit lines at a time when credit risk is looming,” Riley said. “Consumer credit card holders have access to a whopping $4.9 trillion in credit lines. Of that number, $1.14 trillion is in use and revolving, and another $3.78 trillion is available.”
“In the last two years, between Q2 2022 and Q2 2024, issuers increased credit lines from $4.2 trillion to $4.9 trillion, which is $700 billion,” said Riley. “Consumers continue to need access to credit to maintain their budgets and they are falling back on credit card debt. That will exacerbate credit card risk, particularly in 2025.”