By the numbers: Credit card delinquencies improved on a quarterly basis in Q3.
- The 30-day delinquency rate fell to 8.8% in Q3 2024, compared with 9.1% in Q2, per the Federal Reserve. But this is still up from 8.01% last year.
- Serious delinquencies (90 days or more) were also down on the quarter but up on the year. It was 7.1% in Q3 2024, compared with 7.2% in Q2 and 5.8% in Q3 2023.
Credit card balances increased by $24 billion from Q2 to $1.17 trillion during the quarter.
What this means: Delinquency rates are moderating—albeit slowly.
Here are some factors weighing on the recovery.
- High credit card interest rates. Credit card interest rates hit a record 21.76% in September. While the Federal Reserve started cutting rates that month, it will take a few quarters before consumers feel its effects. And if recent mortgage rate movements are any indicator, it could take longer than anticipated.
- Inflation. Stubborn inflation is also weighing on consumers: The consumer price index hit 2.6% in October, compared with 2.4% in September, per the Bureau of Labor Statistics.
- Demographic divide. The credit card recovery has been uneven. Lower-income consumers have borne the brunt of higher inflation, a softer labor market, and increased borrowing costs.
The bigger picture: It’s not all bad news when it comes to the state of consumer financial health. Growth in income has consistently outpaced debt, per Fed data.
The ratio of consumer’s total debt balance to income fell to 82% in Q3, compared with 86% in 2019.
Our take: Consumer financial health remains fairly unchanged. While some metrics could be cause for concern, others are more positive.
- The Fed’s rate cuts should speed up the recovery, making it easier for consumers to pay off their credit card debts—but again, it may take a while to get there.
- President-elect Donald Trump’s win also introduces new uncertainties. His economic policies like wide-reaching tariffs and tax cuts could put pressure on inflation and shake things up.