Rising Credit Card Delinquencies: What You Need to Know

The Federal Reserve Bank of New York has reported that seriously overdue credit card debt is at its highest level in over a decade, with people 35 and under struggling the most to pay their bills. The share of credit card debt that is severely delinquent, meaning more than 90 days overdue, has risen to 10.7% in the first quarter of 2024, up from 8.2% a year ago.

Experts are advising those at risk of delinquency to seek help from nonprofit credit counselors and to negotiate directly with their creditors. Nonprofit credit counselors can provide free consultations and help create debt management plans with lower interest rates and no late fees. It is important to be cautious of for-profit debt consolidation companies that may charge higher fees.

The increase in delinquencies is attributed to factors such as high interest rates, the end of pandemic-era aid, stagnant wage growth, and rising rent costs. Silvio Tavares, CEO of VantageScore, noted that renters are particularly vulnerable to falling behind on payments. Younger and less affluent individuals are facing challenges, with high interest rates exacerbating the situation.

Credit card delinquencies are on the rise, outpacing income growth, and experts warn that a worsening economy could push more consumers into severe delinquency. It is crucial for borrowers to know their credit score, keep up with payments, and avoid over-extending themselves with “buy now, pay later” loans.

The increase in credit card delinquencies is a concerning trend, especially as retail spending has stalled and major companies like Walmart, Starbucks, and McDonald’s are adjusting their sales expectations. The impact of these delinquencies on the overall economy remains to be seen, but it is clear that financial literacy and responsible borrowing practices are more important than ever.