More Americans are maxing out their credit cards and falling behind on payments

A report from the Federal Reserve Bank of New York released Tuesday reveals that the portion of national credit card debt held by borrowers who have maxed out their cards is nearing pre-COVID 19 levels. And what’s more, those maxed-out borrowers are going into delinquency at a much higher rate than they were before the pandemic.

The New York Fed looked at household debt in general and found that Americans owe a collective $17.7 trillion dollars for consumer loans, student loans, and mortgages. Within all that, serious delinquencies, or loans that are 90 days past due, crept up to 1.54% from 1.08% at the end of last year. But within that data point, serious delinquencies had climbed to 6.86% from 4.57%.

“In the first quarter of 2024, credit card and auto loan transition rates into serious delinquency continued to rise across all age groups,” said Joelle Scally, Regional Economic Principal within the Household and Public Policy Research Division at the New York Fed in a commentary accompanying the numbers. “An increasing number of borrowers missed credit card payments, revealing worsening financial distress among some households.”

Gen Z and Millennial borrowers, as well as lower-income borrowers, tended to have higher credit card utilization rates. And the higher those utilization rates, the more likely borrowers were to end up in delinquency. Among those whose balances were north of 90% of their credit limits, nearly a third of them had fallen behind on their payments over the last year.

“The share of maxed-out borrowers has been increasing from pandemic lows and is approaching pre-pandemic levels, and the delinquency transition rates of these maxed-out borrowers are now noticeably higher than pre-pandemic, resulting in higher transition rates into credit card delinquency overall,” the New York Fed noted. “For a positive improvement in credit card delinquency, we would need to see the delinquency transition rate among maxed-out borrowers begin to decline and/or the share of maxed-out borrowers to fall. So far, the data show neither of these trends moving in the right direction.”