Persistent Increase in U.S. Credit Card Delinquencies: Regional and Income Impact

Persistent Rise in U.S. Credit Card Delinquency

August 2023, Regional Economist Publication Highlighted a recent surge in credit card debt delinquencies. This blog post builds upon that insight by emphasizing the ongoing increase in U.S. credit card delinquency rates across various regions and metrics.

The analysis relies on quarterly data from The Federal Reserve Bank of New York's Equifax Consumer Credit Panel to examine two key indicators: 1 the percentage of individuals who are late with their payments, i.e., being in default by more than 30 days; 2 the proportion of outstanding debt that is in default. This study spans a period from the first quarter of 1999 to the first quarter of 2024 for those aged between 20 and 64 years old.

We further categorized U.S. ZIP codes into deciles based on their per capita aggregate gross income in 2019, derived from IRS individual income tax data. This approach helps elucidate the broad impact by showcasing national trs alongside regional specifics.

The Growing Number of Individuals Struggling with Credit Card Delinquencies

Graph description: A logarithmic scale graph illustrates the percentage of individuals reporting credit card delinquency over time.

It is notable that for eight to eleven consecutive quarters, a rise in individual credit card delinquencies has been observed across all analyzed regions. While the increase is widespread, it appears more pronounced in lower-income ZIP codes, with rates climbing from 11 to 17.4 58 relative increase since the second quarter of 2021. For instance:

• The U.S., Eighth District, and lowest decile ZIP code clusters all saw their delinquency ratios reach at least 94.8, 93.7, and 93.6 respectively, from peak levels during our examined period.

The Increasing Percentage of Credit Card Debt in Delinquency

Graph description: A separate chart shows the percentage of total credit card debt that is considered delinquent.

Credit card lers have experienced a continuous rise in default rates across regions over three to seven quarters. The data reveal that each region's delinquency rate has increased by at least 32.2 relative since hitting its lowest point, with the wealthiest ZIP codes experiencing the most significant proportional increase from 4.8 to 7.4, or a 54 rise. In comparison, lower-income areas saw their rates climb from 14.9 to 21, indicating a 41 relative increase.

Explning Credit Card Delinquency: A Tr Before and After the Pandemic

While credit card delinquencies have rebounded from pandemic-induced lows due to temporary relief programs, current levels are higher than pre-pandemic conditions. This suggests that this tr, which began prior to COVID-19, has accelerated. Researchers at the St. Louis Fed are currently investigating how much of this increase can be attributed to rising interest rates and tightened monetary policy.

Understanding the Impact on Consumer Sping

Questions regarding how deteriorating household financial conditions might affect consumer sping remn part of our ongoing research. The blog post serves as a platform for sharing insights, findings, and analysis in these areas.

Authors' Contributions

Juan M. Sanchez, an economist and senior advisor at the Federal Reserve Bank of St. Louis, has contributed expertise on topics involving corporate, household, and international financial decisions. He joined our team in 2010.

Masataka Mori is a research associate contributing to this work as well.

Topics Covered

Consumer Sping

Debt

Household Finances

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