Soaring US Credit Card Delinquency Rate... Highest Since 2012

Inflation and Interest Rate Hike Effects
Return to Pre-COVID-19 Pandemic Levels

Americans are struggling with credit card debt. The delinquency rate on credit cards in the United States has risen to its highest level in over a decade. It is considered to have returned to pre-COVID-19 pandemic levels.

On the 11th (local time), Bloomberg reported that according to a report from the Federal Reserve Bank of Philadelphia, as of the third quarter of last year, about 3.2% of the total card payments were delinquent for at least 30 days. This represents an increase of 43 basis points (1bp = 0.01 percentage points) compared to the previous quarter.

The balance delinquent for more than 60 days is 2.21%, and for more than 90 days is 1.52%. These increased by 30bp and 20bp respectively. Bloomberg assessed that delinquencies at all stages (30-day, 60-day, and 90-day delinquency) have increased compared to the third quarter of the previous year, surpassing pre-pandemic levels.

According to the report, the delinquency rate has exceeded that of the fourth quarter of 2019, before the COVID-19 pandemic, reaching the highest level since data collection began in 2012.

After the COVID-19 pandemic, living expenses surged, but incomes did not increase accordingly, and with rising interest rates, American households are struggling. Over the past three years, inflation has persisted, increasing household spending and consumer debt such as credit card usage. Additionally, monetary tightening policies have pushed interest rates to their highest levels in 20 years.

The number of people who only partially repay their credit card bills is also increasing. The proportion of card users who paid their full balance in the third quarter of last year was 33.18%, the lowest level since the fourth quarter of 2020.

In response to consumers becoming more vulnerable to debt, the Federal Reserve Bank of Philadelphia stated that banks are conservatively approving credit limit increases and are more frequently reducing limits. Loan limits are also being cut. However, the Philadelphia Fed noted that this causes consumers to use their credit cards more. One in ten U.S. card users has payments reaching 95% of their credit limit. Revolving credit card balances are also rapidly increasing. In the third quarter of last year, revolving credit card balances exceeded $600 billion (approximately 788 trillion won).

Ted Rossman, senior industry analyst at Bankrate, said, "Consumers generally incur credit card debt due to real issues such as medical bills, unexpected home or vehicle repairs, and everyday expenses. Over the past few years, inflation has been high, causing prices of everything from oil to groceries to rise, making this situation very common. It is a realistic but hard-to-break cycle."

This content was produced with the assistance of AI translation services.