Although delinquencies have yet to reach concerning levels, the pace of them is causing some alarm.
Consumers are having a tougher time making their credit card payments—and that may soon put pressure on banks and other lenders.
Delinquencies hit an all-time low, at 1.6%, during the third quarter of 2021 when households were flush with pandemic stimulus cash. But they nearly doubled in just under two years as excess savings dried up while persistent inflation ate away at household nest eggs. “Credit card delinquency rates are back to where they were at the end of the last economic expansion, which in and of itself is not worrisome. The speed of that ascent is somewhat disturbing, however, in terms of what it says about the US economy,” wrote Nicholas Colas, co-founder of DataTrek Research.
On the flip side, the Federal Reserve’s moves to lift interest rates have led credit card interest rates to increase by 43% over the last 18 months—marking the fastest clip on record, according to St. Louis Fed data dating back to 1994.
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