Credit Card Debt Is Rising Again. What the Latest New York Fed Data Means for Consumers

Credit card balances rose $21 billion (1.7%) in the second quarter to $1.26 trillion, reversing the $25 billion seasonal decline in the first quarter, according to the latest Household Debt and Credit Report from the Federal Reserve Bank of New York. This is close to last year’s record high of $1.28 trillion. So Americans collectively carried more debt into the summer than they did at the beginning of the year.

But the latest data doesn’t suggest consumers are broadly falling behind on those balances. Aggregate credit card limits also increased $85 billion during Quarter 2, up 1.1% from the previous quarter. So with balances and credit limits expanding, consumers are returning to their credit cards for spending as issuers continue to make additional credit available.

This is part of broader trending data we also see in TransUnion’s latest report, which shows lenders are cautiously optimistic about expanding credit access. [Read: Best Credit Cards] The key takeaway from this latest data is that credit card delinquency transitions remained relatively stable, despite credit card balances 90-plus days delinquent rising from 7.6% to 12.8%. In a corresponding blog post, New York Fed researchers said this data, “prompted concerns that Americans are falling behind on their debt payments at rates not seen since the Great Recession.

Yet the flow delinquency rate — which captures the rate of new delinquencies — has remained relatively stable for almost two years. … We find that 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.” So while consumers are borrowing more, that hasn’t necessarily translated into a broad surge in credit card delinquencies. But the relatively stable delinquency rates don’t mean every borrower is doing fine.

“A lot of households live paycheck to paycheck,” the New York Fed researchers said in a news call on Tuesday. The broader report also shows continued financial pressure in other areas, such as student loan debt. For now, the data paints a picture of consumers using more credit without a corresponding surge in serious delinquency.

The bigger question, however, is whether that borrowing will remain manageable, or whether today’s higher balances eventually become tomorrow’s missed payments… Credit card delinquency rates remained high, with about 13% of balances 90 days or more past due in June.