Delinquencies among excess borrowers are getting worse

This morning, the Microeconomic Data Center at the Federal Reserve Bank of New York released Household Debt and Credit Quarterly Report Season 1, 2024. Auto loans increased by $9 billion, continuing steady growth since the second quarter of 2020, while other non-housing debt balances declined. Credit card balances fell by $14 billion, which is typical for the first quarter. However, more and more borrowers are falling behind on their credit card payments. In this article, we explore the relationship between credit card delinquencies and changes in credit card “usage” rates.

The overall national credit card utilization rate (i.e., the proportion of total credit limit used) last quarter was about 30%, which was the same as in previous quarters. However, individual utilization rates varied widely: 52% of borrowers used less than 20% of available credit in the first quarter, while 18% used at least 90% of available credit (19% were between 20% between). Here, we focus on the proportion of borrowers who use 90% or more of their credit limit (what we call “top borrowers”) and their likelihood of missing a credit card payment.

Credit card delinquency rates rise

For all debt except student loans, delinquency rates have been rising steadily since the fourth quarter of 2021 after hitting historic lows during the COVID-19 pandemic. In particular, credit card delinquency rates have exceeded pre-pandemic levels. Will this trend continue, or are we likely to see a leveling off or even a decrease in credit card delinquency rates?

Missed credit card payments are caused by a variety of factors, from forgetfulness to cash flow constraints and lost revenue. Most of these are difficult to predict or observe in individual-level credit profiles; however, one observable factor that is strongly associated with future delinquency behavior is high credit card usage. The median utilization rate for all borrowers with full funds on their cards in the first quarter of 2024 was 13% last quarter, while the median utilization rate for newly delinquent borrowers was 90%. This makes sense, since using nearly all of your available credit may indicate a tight cash flow situation. In fact, credit utilization is a key input to a credit score, designed to measure the likelihood of future default.

This strong correlation between utilization and delinquency rates suggests that looking at overmaxed borrowers can provide insight into where new delinquency rates are heading.

The chart below shows the percentage of credit card balances currently held by borrowers that have recently transitioned into delinquency, broken down by borrowers' credit card usage in the previous quarter. Rates are smoothed as a four-quarter moving sum to avoid seasonality. Throughout the time series, the two groups with the lowest utilization rates have lower delinquency rates (1% for the 0-20% utilization group and 4% for the 20-60% utilization group) and are currently at pre-pandemic levels. However, conversion rates among users with utilization rates above 60% have exceeded pre-pandemic levels and continue to rise, accounting for the majority of overall credit card delinquency growth. The growth has been particularly significant for the 90-100% utilization group; about one-third of balances associated with over-aborted borrowers were delinquent last year, compared with less than a quarter of balances each year before the pandemic. one.

Borrower default rates rise

The line chart tracks balances that transitioned into delinquency as a percentage between 2015 and 2025, with borrower utilization rates of 0-20% (light blue), 20-60% (red), 60-90% (gold) and 90- 100% (dark blue) blue).
Source: Federal Reserve Bank of New York Consumer Credit Group/Equifax.
Note: This chart shows the balance-weighted transition into credit card delinquency for borrowers on all credit card accounts during the past quarter. A borrower's utilization group is determined by its utilization during the previous quarter. Data are smoothed to a four-quarter moving sum to account for seasonal trends.

It's worth noting that credit card utilization is a function of balance and credit limit, with people with lower credit limits generally having higher utilization ratios. In fact, borrowers currently in the 90-100% utilization range had a median first-quarter total credit limit of $5,000, less than half the $10,050 median limit for the 60-90% group and less than 0-90 % quarter of the ethnic group. So, to some extent, utilization also reflects underlying credit quality and income, since borrowers with higher incomes and higher credit scores typically have higher limits and lower utilization rates.

The table below shows median credit card balances and limits in the first quarter of 2024, as well as the percentage of borrowers who were maxed out versus non-delinquent borrowers. block) group). Although median balances are more similar across income groups, borrowers in higher-income areas are less likely to have higher credit card utilization (partly due to differences in credit limits—the median for the top quartile is $25,800, compared with $11,300 for the lowest quartile median). Note that delinquent borrowers are excluded from this table as most of them are already overdrawn due to spending reaching the limit or the lender reducing the limit to prevent further spending.

Younger card users and those living in low-income areas are more likely to be maxed out

Median Balance median
income quartile First (lowest) $1,410 $11,300 12.3%
second place $1,597 $15,000 10.2%
third place $1,817 $18,600 8.1%
Fourth place (highest) $2,099 USD $25,800 5.5%
generations Generation Z $760 $4,500 15.3%
Millennials $2,378 $16,300 12.1%
Generation X $3,017 USD $21,800 9.6%
baby boomers $1,599 $22,000 4.8%

Source: Federal Reserve Bank of New York Consumer Credit Panel/Equifax; American Community Survey.
Note: Borrowers' income quartiles are based on the median household income in their census block group. The borrower's generation is determined based on their year of birth. Baby Boomers are those born between 1946 and 1964, Generation person born.

We also differentiate credit card usage by the borrower's year of birth. The incidence of high utilization borrowers appears to decline over the life cycle. Few baby boomers have used up their credit limit, while 15.4% of Gen Z credit card users have used more than 90% of their credit limit. However, Gen Z borrowers also have a lower median limit at $4,500, while the median limit for older generations ranges from $16,300 for Millennials to $22,000 for Baby Boomers. This can largely be attributed to the youngest generation having shorter credit histories and therefore lower credit scores, as well as lower incomes. The average age of Gen Z’s first credit card account is four years, while the average age of Millennials is eleven.As we explore in our 2023 Season 3 post quarterly reportGen Z has the highest crime rate, but Millennials are the only group whose crime rate is higher than before the pandemic.

The chart below shows the time series for the top non-delinquent borrowers, with the blue line representing their share of current borrowers and the red line representing their share of total current balances. Credit card borrowers made significant repayments in 2020 and 2021, during which incomes increased due to pandemic transfers and aid but consumption opportunities were limited, resulting in a decline in the proportion of borrowers who were overdrafted. Since the economy reopened in 2022 and consumption was very strong in 2022 and 2023, credit card balances have increased again, causing the proportion of borrowers to be overdrafted and their balances to rise. These stocks are still slightly below pre-pandemic levels but are recovering slightly.

The proportion of credit card overdrafts continues to rise

Line chart tracking, as a percentage, the share of borrowers that are exhausted between 2014 and 2024 (light blue) and the share of balances held by exhausted borrowers (red).
Source: Federal Reserve Bank of New York Consumer Credit Group/Equifax.
Note: Maxed-out represents all borrowers with a credit card utilization ratio of 90% or higher. Delinquent borrowers and balances are excluded. Data are not smoothed and reflect seasonal patterns.

in conclusion

We have demonstrated that new credit card delinquencies are disproportionately attributable to borrowers and their balances that have exceeded their limit. The share of fully-maximized borrowers has increased from pandemic lows and is approaching pre-pandemic levels, and the delinquency transition rate among these fully-maximized borrowers is now significantly higher than pre-pandemic, resulting in higher credit card delinquency rates across the board. To actively improve credit card delinquency, we need to see the delinquency transition rate among fully-maximized borrowers begin to decline and/or the share of fully-maximized borrowers decline. So far, the data shows that neither trend is moving in the right direction. If these trends continue and other factors that influence delinquency rates remain unchanged, credit card delinquency rates will likely continue to rise. Of course, macroeconomic conditions can move these trends in either direction, so we will continue to monitor the situation in the coming quarters.

Photo: Portrait of Andrew Howart

Andrew F. Haughwout is director of the Household and Public Policy Research Division in the Research and Statistics Group at the Federal Reserve Bank of New York.

Portrait of Lee Dong-hoon

Donghoon Lee is an economic research consultant for consumer behavior research in the Research and Statistics Group at the Federal Reserve Bank of New York.

Image of Daniel Mangrum

Daniel Mangrum is a research economist in the Equitable Growth Study in the Research and Statistics Group at the Federal Reserve Bank of New York.

Photo: Portrait of Joel Scully

Joelle Scally is regional economics director in the Research and Statistics Group at the Federal Reserve Bank of New York.

Photo: Portrait of Wilbert Vanderkraut

Wilbert van der Klaauw is an economic research consultant for Household and Public Policy Research in the Research and Statistics Group at the Federal Reserve Bank of New York.

Photo: Portrait of Research Analyst Crystal Wang

Crystal Wang is a research analyst in the Research and Statistics Group at the Federal Reserve Bank of New York.

How to cite this article:
Andrew F. Haughwout, Donghoon Lee, Daniel Mangrum, Joelle Scally, Wilbert van der Klaauw, and Crystal Wang, “Growing Delinquencies among Excess Borrowers,” Federal Reserve Bank of New York Liberty Street EconomyMay 14, 2024,

The views expressed in this article are those of the author and do not necessarily reflect the position of the Federal Reserve Bank of New York or the Federal Reserve System. Any errors or omissions are the responsibility of the author.

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