Credit card debt among young people rising, Fed report shows

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Across the U.S, credit card debt has continued to climb, with delinquencies rising most among young people, according to a recent report from the Federal Reserve Bank of New York.

Total credit card balances increased by $50 billion to $1.13 trillion in the fourth quarter of 2023 — the highest level since the Fed’s report started in 2003. Total household debt rose by 1.2%, compared to the previous quarter.

Serious credit card delinquencies of 90 days or more increased across all ages, “notably with younger borrowers surpassing pre-pandemic levels,” according to the New York Fed, with the biggest rise among people ages 18 to 29, followed by those ages 30 to 39.

Credit card and auto loan delinquencies 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,” he said.

One factor may be high credit card interest rates, which make timely repayment more difficult.

People are carrying more debt for longer periods of time at record-high interest rates, noted Ted Rossman, senior industry analyst at Bankrate, a personal finance company.

The average credit card interest rate reached a new record high of 20.72% last year, up 4.42 percentage points since the beginning of 2022. That was the largest two-year increase since Bankrate’s tracking began in the mid-1980s.

Annualized, about 8.5% of credit card balances and 7.7% of auto loan balances were delinquent, said the New York Fed’s report, released Feb. 6.

“Using your credit card as a supplement to your income can be risky for your finances because spending more than you’re earning will lead to more debt,” said Monique White, head of community at Self Financial, a credit-building platform. “Being clear with your budget, keeping your card utilization low and staying in touch with creditors to set a payment plan if you anticipate late or missed payments are all useful ways to try to protect your credit.”

For mortgages, early delinquency rates edged up 0.2 percentage points, yet remain low by historic standards.

Overall delinquency rates increased slightly in the fourth quarter of 2023 but remain 1.6 percentage points lower than the fourth quarter of 2019.

Last quarter, delinquency rates increased for all products except student loans. However, missed federal student loan payments will not be reported to credit bureaus until the fourth quarter of this year.

Repayment for federal student loans and interest was suspended for three years during the COVID-19 pandemic. That pause ended in October, when payments were set to resume. More than 1.5 million Illinois residents have a total of $61 million in student debt .

Rising delinquencies in the fourth quarter last year continued the same trend of the previous quarter, but exact reasons remain unclear.

“The labor market and the general economy have remained resilient throughout this period which makes pinning down the causes of rising delinquency rates more difficult,” the New York Fed said in November, when it released its third quarter report. “Whether this is a consequence of shifts in lending, overextension, or deeper economic distress associated with higher borrowing costs and price pressures is an important topic for further research.”

The New York Fed’s report is based on data from its Consumer Credit Panel, a nationally representative sample drawn from anonymous credit data from credit reporting agency Equifax.