Priya Patel
TLDR: Credit card delinquencies surged more than 50% in 2023, according to the New York Federal Reserve. This increase in delinquencies is indicative of “financial stress” among consumers. Total consumer debt rose to $17.5 trillion, with credit card debt totaling $1.13 trillion. Debt that transitioned into serious delinquency, or 90 days or more past due, increased to 6.4% in the fourth quarter of 2023, a jump of 59% from the previous year. Delinquencies also rose in mortgages, auto loans, and other categories. However, student loan delinquencies decreased, as did home equity lines of credit. Increased financial stress was particularly observed among younger and lower-income households.
The rise in delinquency levels comes as total debt continues to increase at a pace similar to pre-pandemic levels. Household debt rose by $212 billion in the fourth quarter of 2023, a quarterly increase of 1.2% and a year-on-year increase of 3.6%. Notably, credit card debt increased by 14.5% compared to the same period in 2022, and auto debt climbed to $1.61 trillion, a quarterly increase of $12 billion and an annual increase of $55 billion. The increase in interest rates is cited as a factor contributing to the rise in delinquencies, with credit card interest rates jumping from about 14.5% to 21.5% during the tightening cycle of the Federal Reserve.
In contrast, student loan debt remained relatively stable during the pandemic period, with little change in total debt. President Joe Biden has forgiven approximately $136.6 billion in student loan debt since taking office. Mortgage debt increased by 2.8% in 2023, and the delinquency rate increased to 0.82%, up from the previous year.
Overall, the increase in credit card delinquencies highlights the financial stress faced by many consumers, particularly younger and lower-income households. The rise in delinquencies is occurring alongside an increase in total consumer debt, driven in part by higher interest rates. While certain categories, such as student loan debt, have remained stable, it is clear that many consumers are struggling to manage their debt obligations.
