Credit card and auto loan delinquencies are the highest in more than a decade
New York (CNN) — Americans — particularly Millennials and those with lower incomes — are becoming increasingly overextended financially: Credit card and auto loan delinquencies have not only surpassed pre-pandemic levels, they’re the highest they’ve been in more than a decade.
During the fourth quarter, US household debt hit a fresh high of $17.5 trillion, up 1.2% from the three months before, according to the Federal Reserve Bank of New York’s latest Quarterly Report on Household Debt and Credit released Tuesday.
Debt balances increased across the board, with credit card balances rising $50 billion to hit a new nominal high of $1.13 trillion (when adjusting for inflation, balances have yet to surpass the levels seen in 2008).
While rising debt levels shouldn’t come as a surprise — especially when the holiday season typically correlates to heftier credit card balances — New York Fed researchers say they’re keeping a close eye on the extent to which Americans are falling behind.
“Credit card and auto loan transitions into delinquency are still rising above pre-pandemic levels,” Wilbert van der Klaauw, economic research adviser at the New York Fed, said in a statement. “This signals increased financial stress, especially among younger and lower-income households.”
During the fourth quarter, an annualized 8.52% of credit card balances and 7.69% of auto loan balances became delinquent, marking the highest annualized rates since the second quarter of 2011 and the fourth quarter of 2010, New York Fed data shows.
“The delinquency numbers are pretty eye-opening, especially when it comes to credit cards,” Matt Schulz, chief credit analyst at LendingTree, told CNN via email. “We still aren’t anywhere near the levels we saw in the height of the Great Recession, but they are the highest we’ve seen since 2011. The most troubling part is that there’s plenty of reason to believe that they’re only going to climb higher.”
Overall delinquency rates remain relatively tame, thanks mostly to mortgage and student loans performing well, New York Fed researchers said.
Mortgages, which make up the lion’s share of overall debt, have been helped by a higher-quality borrower class and the pandemic-era refinancing boom. Student loan delinquencies will not be reported to the credit bureaus until later this year.
This story is developing and will be updated.
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