Delinquencies on credit cards are increasing; almost 1 in 5 users has achieved the maximum: Research

Credit card delinquencies are on the rise as new research from the New York Federal Reserve shows that nearly a fifth of borrowers have reached their maximum capacity.

In the new report published by According to the bank's Center for Microeconomic Data, household debt rose 1.1 percent (or $184 billion) in the first quarter of the year, bringing the total to $17.69 trillion.

“In the first quarter of 2024, transition rates from credit cards and auto loans to serious delinquency continued to rise across all age groups,” Joelle Scally, regional economic director within the bank's Department of Domestic and Public Policy Research, said in a statement.

“An increasing number of borrowers were missing credit card payments, revealing a worsening financial hardship among some households,” Scally added.

National total credit card usage was found to be 23 percent in the first quarter, in line with previous quarters. But a closer look behind these figures revealed some major differences in occupancy rates.

Nearly half of borrowers 'used less than 20 percent of their available credit in the first quarter' breaking down of the report explained, compared to 18 percent of borrowers who used “at least 90 percent of their available credit.” This last group was dubbed “maximum borrowers.”

Before the coronavirus pandemic, the report found that less than a quarter of these borrowers' balances were delinquent each year. By comparison, roughly a third of balances became delinquent last year.

It was also found that younger borrowers were more likely to reach their maximum capacity, as were card users living in 'low-income areas'.

The survey found that overall defaults rose in the first quarter, with 3.2 percent of outstanding debts at some stage of delinquency at the end of March.

“Delinquency transition rates have increased for all types of debt. On an annual basis, approximately 8.9% of credit card balances and 7.9% of auto loans have gone into delinquency,” said a press release detailing the report. “The mortgage delinquency rate increased by 0.3 percentage points, but remains low by historical standards.”

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