Credit Cards Showing Strains

When consumers fall behind, the credit card bill goes unpaid.

In our best teaching moments, we have helped our audiences overcome meganumerophobia, the fear of large numbers. Figures in the billions and trillions can sound scary and may lead to ominous inferences and conclusions. We encountered this last year, as the total balance on U.S. consumer credit cards reached one trillion dollars. Some thought that this was a sign that consumers were in trouble.

We did not rush to worst-case conclusions. Inflation drove up nominal card balances, and the credit card sum combines card holders who pay in full and those who revolve a balance. More broadly, debt can be used for any number of purposes, and we should not assume more debt is always a bad outcome. We look at delinquencies to judge whether households are overextended. And last week, the signal of debt performance became worrying.

The share of credit card balances entering severe delinquency (90 days past due) has risen from a record low of 3.0% in early 2022 to a 12-year high of 6.4% at the end of 2023.

Total revolving card balances fell as stimulus payments were issued in 2020. Balances now stand 46% above their first quarter 2021 lows. Such a rapid rise in balances, far in excess of the rise in wages, suggests more delinquencies are still in the pipeline.


Share of Credit Cards Entering Delinquent Status