The New York Fed's Q2 household debt report shows credit card delinquency flows have held near 7 percent for two years, even as the stock of 90-plus-day delinquent balances climbed to 12.8 percent — a divergence driven by stale, charged-off debts lingering on credit reports.
The share of credit card balances transitioning into serious delinquency has held near 7 percent annually for two years, even as the stock of 90-plus-day delinquent balances climbed to 12.8 percent, according to the Federal Reserve Bank of New York's Quarterly Report on Household Debt and Credit released Tuesday.
"The stock delinquency rate is rising because of a pool of stale, charged-off debts that lenders have been reporting for longer durations, rather than a fundamental worsening in the incidence of delinquency," the New York Fed researchers wrote in a Liberty Street Economics post accompanying the report.
Credit card balances rose $21 billion in the second quarter to $1.26 trillion, up 1.7 percent from the prior quarter and nearing last year's record of $1.28 trillion. Total household debt slipped $13 billion to $18.8 trillion, with the overall delinquency rate easing to 4.7 percent from 4.8 percent. Auto loan originations hit a nominal record of $211 billion, while home equity balances rose $19 billion — part of a four-year trend as older homeowners avoid refinancing at current mortgage rates.
The divergence between stock and flow delinquency measures has implications for how investors and policymakers read consumer health. Flow delinquency — the pace at which new debts become delinquent — provides a more accurate view of current repayment behavior, the researchers said, while the stock measure overstates distress because lenders now report charged-off debts to credit bureaus for roughly twice as long as they did in the 2004-2012 period.
The stock delinquency rate is driven by three factors: the pace of new delinquencies, the rate at which delinquent debts cure back to current, and how long older charged-off debts remain in the data. Between 2004 and 2012, only about 40 percent of borrowers' charged-off debts were still being reported one year later; by 2024, that figure had doubled to 80 percent. When the researchers removed severely derogatory balances from the stock rate, it fell in line with both the flow rate and the Federal Reserve Board's Call Report delinquency series.
The distinction matters for the more than 23 million Americans still carrying charged-off credit card balances on their credit reports. "To us it reflects this K-shaped economy," the New York Fed researchers said on a press call. "There are a lot of households that live paycheck to paycheck."
About 175 million Americans hold credit cards, and roughly 60 percent carry revolving debt, leaving them more financially vulnerable. A separate survey by debt management company Achieve found 55 percent of consumers carry credit card balances to cover essential expenses, and 56 percent of borrowers said it would take six months or longer to pay off all their credit card debt.
"The rise in credit card debt, HELOC debt and other debts, which include personal loans, clearly show that people are looking for ways to extend their budget in the face of stubborn inflation," said Matt Schulz, chief credit analyst at LendingTree.
The report adds detail to a puzzle for Federal Reserve policymakers and economists who have wondered when prices rising faster than incomes will translate into more obvious signs of stress — either a blow to consumption or an outsized rise in debt and delinquency. The New York Fed researchers said they will continue to monitor consumer balance sheets in coming months. "When the question is 'how are households doing right now?' the pace of credit card delinquency is elevated but has been largely stable since 2024," they concluded.
This article is for informational purposes only and does not constitute investment advice.
