Historical U.S. Credit Card Delinquency Rate Study

Credit card delinquency rates, as measured by the Federal Reserve Bank of New York for accounts that are 90 days or more late in making payments, have ebbed and flowed with economic conditions over the decades but reached their all-time peak during the financial crisis in Q4 of 2009 when they reached an eye-popping 11.0%. Following that dark financial chapter Americans steadily deleveraged (paid down their outstanding credit card balances) for several years, going from a brief high of just over $1 trillion before the beginning of the crisis in December 2008 to less than $800 billion in the years following.

According to our research, outstanding card balances stayed relatively flat in the intervening years but began to consistently build again as the economy slowly rebounded beginning in 2014, reaching $975 billion in Q4 of 2020. With growing credit card balances, delinquency rates began creeping up mid-decade, though well below alarming levels seen during the previous decade. Delinquency rates have dropped dramatically in the past year due to the pandemic, however.

Card Delinquencies Fell During the Pandemic

Counter to the upward trend of delinquency rate in recent years, which began building in mid-2016 after reaching a low point of 3.5%, the latest data from the Federal Reserve shows that the overall delinquency rate dipped beginning in Q1 of 2020 when it stood at 5.3% and ended the year at 4.1% (likely due to decreased card spending on things like travel and entertainment during the pandemic).

Older Americans Experienced the Lowest Delinquency Rates

The recent trend reversal in the percentage of accounts considered seriously late is encouraging news for U.S. consumers given credit card delinquencies can have an extremely detrimental effect on individuals' credit scores, as payment history makes up more than a third of FICO scores. Based on age cohort, though, it is apparent that different age groups experienced varying rates of delinquency, largely favoring progressively older Americans by a degree of severity. The lowest rates of delinquency since 2000 were for those 60-69. Notably, those over 70 had slightly higher delinquency rates vs. the next younger baby boomer cohort, perhaps due to the inability to service unexpected medical bills or the inflexibility of living on a fixed income in retirement.

Young Adults Have Been Disproportionately Affected

Not surprisingly given lower income rates, the youngest age cohort has consistently experienced the highest credit card delinquencies over time with their all-time peak occurring many years before the financial crisis, in Q4 of 2002 at 14.5%. While maintaining delinquency rates well above other age groups through the past two decades, 18–29-year-olds encouragingly saw the largest decrease during 2020—going from 9.2% in Q1 down to 5.7% in Q4. Younger adults likely have a higher proportion of travel and entertainment spending that has been blunted by COVID-19 restrictions over much of 2020.

The Bottom Line

While overall credit card delinquencies have remained well below the levels experienced a decade ago their increase as a percentage of total outstanding balances between 2016 and 2019 are a concerning symptom of consumers living beyond their means, possibly using credit cards as an extension of their income to make ends meet or becoming over-extended through buying goods and services they can't afford to immediately pay off.

The dramatic drop of seriously delinquent accounts in 2020, while encouraging, is likely a temporary result of displaced discretionary spending due to the pandemic, though. Hopefully, a resurgent economy following large-scale vaccinations will improve consumers' financial situations and allow for better long-term debt servicing trends as credit card outstanding balances likely grow.