In 2023 credit card delinquencies surged more than 50% as total consumer debt grew to $17.5 trillion. Quarter-over-quarter total debt rose by $212 billion or 1.2%, and rose 3.6% year-over-year.

Debt that is defined as seriously delinquent, or 90 days-plus past due, increased across multiple categories in 2023, but the greatest increase was in credit cards. Total credit card debt is $1.13 trillion, and the amount of this debt in serious delinquency was 6.4% in the fourth quarter of 2023, up from 4% at the end of 2022, or an increase of 59% year-over-year.

Delinquencies also rose in mortgages and auto loans but dropped in student loans and home equity lines of credit. Overall, 1.42% of debt was seriously delinquent, versus 1% at the end of 2022. Specifically, mortgage debt rose 2.8% in 2023 and that delinquency rate increased to 0.82%, up a quarter percentage point from 2022.

“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, signaling “increased financial stress, especially among younger and lower-income households.”

The New York Fed said total debt is moving higher in line with the pace before the Covid-19 pandemic began, while delinquency levels are rising. Household debt had an increase of about 3.6% from a year ago. Auto debt climbed 3.5% on an annual basis. Credit card debt, however, jumped 14.5% from the same period in 2022.

Borrowers have been hit by higher interest rates as the Fed hiked its short-term borrowing rates by 5.25 percentage points in its tightening cycle from March 2022 to July 2023. The rate is now at its highest level in about 23 years and feeds into most adjustable-rate consumer debt products. On average, credit card rates have jumped from 14.5% to 21.5% since the Fed began its tightening.

The rise in delinquencies is happening while the economy is still growing, raising concerns around a potential deeper downturn if the economy slows and unemployment increases.

According to Fed researchers, rising rates have played a part in the increase of delinquency rates. Auto loan payments, for example, have not changed or decreased much because of the elevated rate structure.

Increasing Risk in Banks

These delinquent credit card accounts are a liability to bank’s financial well-being.

Higher credit card delinquency rates translate to lower profits for banks, leading to an IDCFP rank reduction.

IDC Financial Publishing (IDCFP) identifies risk measurement through several financial ratios, including measure of loan losses. Subscribe today for access to our database of over 10,000 institutions.

1 - Credit card delinquencies surged in 2023, indicating ‘financial stress,’ New York Fed says, cnbc.com 02/06/2024

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John E Rickmeier, CFA
President
jer@idcfp.com

Robin Rickmeier
Marketing Director