According to the Federal Reserve’s second-quarter report, credit card charge-offs and delinquencies remain at more than 12-year highs.
Data from the second quarter of 2024 shows that credit card charge-offs rose from 4.16% to 4.38%, a 12.5-year high not seen since the fourth quarter of 2011. Charge-offs continue to rise quite steeply. With charge-offs lagging for 9-12 months, volumes are likely to continue to rise until at least mid-2025.
Credit card loan delinquencies, an early indicator of the charge-off rate in the first six to nine months, rose to 3.11% from 3.02%, also a 12.5-year high. After the first quarter data was released, it seemed as if delinquencies had peaked; however, the latest quarter’s data shows a possible new increase in velocity.
It’s important to note the context of the increasing delinquency rates. Both credit card loans and delinquencies have increased year-over-year: delinquencies increased about 0.5% year-over-year from 2.63% to 3.11%, and credit card loans increased 10.8% from $1.031 trillion to $1.142 trillion. A larger loan pool AND a higher percentage of delinquencies mean that companies can reasonably expect a high volume of work through mid-2025.
Below are the Federal Reserve charts for the referenced data, which are linked.
Credit card loan amortization rate
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Credit card default rate:
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