How many Americans are falling behind on their credit card payments?

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If you’re struggling to keep up with your credit card payments, you’re not alone. In 2024, credit card debt in the U.S. hit a staggering $1.14 trillion, with delinquency rates soaring to levels not seen in over a decade. But what's behind this surge, and what does it mean for your financial health?

What is credit card delinquency?

Credit card delinquency occurs when a cardholder falls behind on their monthly payments. It’s a key indicator of consumer financial health and economic stability.

According to the Federal Reserve Bank of Philadelphia, the share of credit card balances past due reached the highest level since 2012 in the first quarter of 2024.

Currently, Americans owe $1.14 trillion in credit card debt. Higher prices and interest rates put pressure on consumers, making it harder for many to keep up with their payments. Young adults, in particular, are affected by this.

Understanding credit card delinquency rates

Credit card delinquency rates measure the percentage of cardholders late on their payments. To calculate these rates, you divide the delinquent accounts by the total active accounts.

Delinquencies fall into three categories based on how long the payment is overdue:

• 30 days late
• 60 days late
• 90+ days late (severe delinquency)

It’s important to note that delinquency is not the same as default. Delinquency means being late on payments, while default occurs when the credit card company assumes you won't repay the debt, usually after 180 days of missed credit card payments.

Credit card companies typically report delinquencies to credit bureaus once they're 30 days past due, though some may offer a 60-day grace period. These reports can significantly impact your credit score.

Current credit card delinquency rates

Recent Federal Reserve Bank of New York data shows credit card delinquency rates "remain elevated." Over the last year, approximately 9.1% of credit card balances transitioned into delinquency.

To put this in perspective, the credit card delinquency rate was just 1.54% in the third quarter of 2021 — the lowest since the Federal Reserve began tracking this data in 1991. However, by the second quarter of 2024, it had jumped to 3.25%, a 111% increase.

Several factors are influencing this rise in outstanding debt:

1. Post-pandemic spending boom — consumers are more willing to spend on entertainment and travel
2. Rising inflation and living costs
3. Increased credit card usage
4. The end of pandemic-era financial support

Age also plays a role in delinquency rates. A Federal Reserve Bank of St. Louis study found that young people ages 20 to 39 have much higher credit card delinquency rates than older age groups.

"The youngest cohort may have higher delinquency rates because of higher unemployment rates or more restricted access to credit," says Sánchez and Wilkinson.

Factors influencing delinquency rates

Several key factors impact credit card delinquency rates:

Economic conditions

• Unemployment: Higher unemployment rates often lead to increased delinquencies. According to the Bureau of Labor Statistics, the unemployment rate stood at 4.20% as of August 2024, a slight improvement from July 2024.
• Inflation: Rising prices strain budgets, making it harder for consumers to keep up with payments.
• Economic growth and recessions: People typically rely more heavily on credit cards during recessions.

Personal finance factors

• High debt levels: When debt is high compared to income, the risk of delinquency increases.
• Unexpected events: Medical emergencies, job loss, and other unforeseen circumstances can lead to missed payments or higher credit card bills.
• Financial literacy: A solid understanding of credit management can help protect against delinquency. When you have a solid understanding of credit management, you can make better decisions while reaping the benefits of a credit card account.

Credit industry practices

• Interest rates and fees: Higher rates make it harder for consumers to pay off their cards. The Consumer Financial Protection Bureau (CFPB) reports that average credit card APRs have nearly doubled from 12.90% in late 2013 to 22.80% in 2023 — the highest since 1994.
• Credit scoring models: These can impact how issuers report delinquencies, affecting credit scores and future delinquency rates.
• Credit limit policies: Generous limits make spending easier but can increase the risk of delinquency as balances grow.

Impact of delinquency rates

Credit card delinquencies can have significant consequences.

• Credit score damage: Late payments can lower your score and make future borrowing more difficult and expensive.
• Increased fees and interest rates: Card issuers may add penalty APRs on delinquent accounts, which pushes you deeper into debt.
• Financial stress: Financial struggles take a toll on mental health and lead to anxiety spikes.
• Legal consequences: In severe cases, creditors may pursue legal action to recover debts.

What to do if you miss a payment

If you've missed a payment by a few days, don't panic. Many people occasionally miss payments, either by accident or due to budget constraints. Pay your balance as soon as possible, and it may not significantly impact your credit score.

However, ignoring delinquencies for over 30 days puts you at high risk of consequences. At this point, your card issuer can report you to credit bureaus, apply penalty APRs and late fees, or even take legal action.

Delinquencies also impact credit card issuers, leading to losses and tighter lending standards. On a national scale, high credit card debt can signal economic instability and eventually impact consumer spending.

Strategies for improving your financial health

To avoid delinquency and improve your finances, try these strategies:

• Stick to a budget: Track your income and expenses, categorize your spending, and identify areas where you can cut back. Budgeting apps and spreadsheets can help you visualize your financial picture more clearly.
• Tackle your debt: Pay more than the minimum on your credit cards when possible. Consider using the debt avalanche method (paying off highest interest debt first) or the snowball method (paying off smallest balances first for motivation).
• Balance transfer to a lower-interest card: If you qualify, transferring high-interest balances to a card with a lower rate or a 0% introductory APR can save money and help you pay off debt faster.
• Get a side hustle: Look for ways to make extra income, such as freelancing, asking for a raise, or working overtime.
• Cut unnecessary expenses: Cancel subscription services you rarely use, set a budget for eating out, and reduce impulse purchases. Be mindful of lifestyle creep, where spending increases with income until you can no longer save or pay off credit card debt.

If you're already facing delinquency, seek help early. Credit counseling services and debt management plans can help you regain control of your finances. 

Be cautious of scams and ensure you get help from reputable organizations like the National Foundation for Credit Counseling or the Financial Counseling Association of America.

The bottom line

Many Americans are currently struggling with credit card debt, which reached $1.14 trillion in the second quarter of 2024. Rising inflation, increased living costs, post-pandemic spending habits, and other economic factors lead to more credit card delinquencies.

However, it's important not to panic. With responsible credit use and smart money management, you can get your finances under control, even if you're currently in a tough spot. If you're facing financial difficulties, don't hesitate to seek help. There are resources to help you manage your debt and improve your financial situation.

Editorial disclosure: Opinions expressed are author's alone, not those of any bank, credit card issuer, or other entity. This content has not been reviewed, approved, or otherwise endorsed by any of the entities included in the post.