Credit Card Delinquency Rates Surge: Consumers Struggle as Inflation Rises

Consumers in Chicago, Illinois are seeing a rise in spending despite the gradual decrease in the inflation rate. Charlie Wise, senior vice president of global research and consulting at TransUnion, pointed out that prices are still increasing even though the inflation rate has dropped.

However, it’s worth noting that prices are rising at a slower pace than before. The consumer price index, which is a key measure of inflation, has dipped from a pandemic-era peak of 9.1% in June 2022 to 3.4% in December 2023.

Even with this slowdown in inflation, households are still feeling the strain. More cardholders are struggling with carrying debt from month to month or falling behind on payments. The New York Fed and TransUnion found that credit card delinquency rates have increased, with more than a 50% surge in 2023. “Serious delinquencies,” those 90 days or more past due, have reached the highest level since 2009, according to TransUnion’s research.

At Bankrate, senior industry analyst Ted Rossman mentioned that cardholders who pay their bill in full every month can benefit from cash back and travel rewards without paying interest. However, those who carry a balance on their credit cards are facing record-high average interest rates of 20.74%.

Subprime borrowers, particularly millennials burdened with student loan debt and housing affordability challenges, are contributing to the increase in new credit accounts. This group, with a credit score of 600 or below, is finding credit cards to be a more accessible form of borrowing, as pointed out by Wise.

Rossman suggested that those struggling with credit card debt should consider signing up for a 0% balance transfer credit card, which can offer no interest for up to 21 months. Additionally, borrowers may also explore the option of refinancing into a lower-interest personal loan.

Despite the financial stress experienced by many consumers, it’s important to consider these alternative options for managing credit card debt. Wise emphasized the need for proactive measures to address the growing financial challenges faced by consumers.