Americans are still building up their credit-card balances, but they’re doing a better job paying those bills on time — and it could be sign that inflation’s bite is easing.
While credit-card balances kept growing during the third quarter, slightly less credit-card debt fell into delinquency, according to the Federal Reserve Bank of New York.
Credit-card balances climbed to $1.17 trillion after a third-quarter increase of $24 billion. But the share of debt lapsing into 30-day delinquency declined for the first time in roughly three years.
Approximately 8.8% of credit-card debt transitioned into delinquency in the third quarter, down from more than 9% in the second quarter, the New York Fed’s quarterly household-debt report showed Wednesday.
The average amount of credit-card debt was nearly $6,400 in the third quarter, up roughly $300 from the previous quarter.
Ahead of the New York Fed’s quarterly debt report, the credit-reporting company TransUnion said it was also beginning to see softer increases in debt and delinquency numbers.
Collectively, third-quarter credit-card balances increased nearly 7% from a year ago, according to TransUnion. In 2023, those balances climbed 15% from the previous year. The same trend applied to 90-day delinquencies, where rates were still climbing but not as severely.
There are a couple of possible explanations for the easing in growth of credit-card balances, said Michele Raneri, vice president and head of U.S. research and consulting at TransUnion.
Credit-card lenders have tightened standards on customers, she said, adding that as “inflation has returned to more normal levels in recent months, it has also meant consumers may be less likely to rely on these credit products to make ends meet.”
The credit-card delinquency rate is still historically high and it moved only a slight notch lower, but New York Fed researchers viewed the nudge as a potential bright spot.
One question will be the upcoming holiday shopping season, and whether consumers’ gift lists increase their balances and lead to more delinquencies.
To be sure, many households are still in the red after the sharp jump in inflation rates, despite their ongoing easing. October’s inflation numbers, also out Wednesday, showed a 2.6% yearly increase in the prices of consumer goods and services, versus 2.4% in September.
Consumers’ debt balances grew in all categories, including mortgage debt, car loans, credit cards and student loans, the New York Fed report showed. While early-stage credit-card delinquencies eased slightly, car-loan delinquencycontinued to rise, with 8.1% of the outstanding debt slipping into delinquency.
It’s been more than a decade since delinquency rates for credit cards and auto loans were this high, at a time when consumers were emerging from the Great Recession. This quarter, almost 3% of car-loan debt was more than 90 days past due; early 2010 was the last time that figure was higher.
“Elevated delinquency rates reveal stress for many households, even amid some moderation in delinquency trends this quarter,” said Donghoon Lee, economic research advisor at the New York Fed. Debt balances are continuing to rise, but income growth has outpaced debt, Lee noted.
Paul Siegfried, senior vice president and credit-card business leader at TransUnion, also cited slower-growing balances and delinquency rates. Cooler inflation and wage gains “may be driving consumers toward a financial equilibrium where they balance their monthly expenses and their monthly budget,” he said.
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