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# Credit Card Debt and Economic Health: Analyzing the 2023 Data

![](https://hackmd.io/_uploads/Byc8Kfzla.png)



Credit cards remain one of the most popular forms of payment and borrowing in the United States. According to surveys, nearly 80% of adults had at least one credit card in 2022. However, the convenience of credit cards comes with the risk of accumulating excessive debt that borrowers struggle to repay on time. Delinquent accounts and rising interest costs can create a debt trap and damage credit scores.

In this blog post, we will analyze the latest data on credit card debt delinquencies in the U.S. and discuss how it relates to the economic health of households.

The Rise in Credit Card Debt Delinquencies: A Comparison with the Global Financial Crisis

The percentage of bank credit card accounts that were delinquent stood at 5.32% in Q4 2022, rising from 4.81% in Q4 2021 according to [Global credit card debt statistics](https://www.cardrates.com/advice/average-credit-card-debt-by-country/) and Federal Reserve data. This marks the highest delinquency rate since the 5.82% recorded during the Great Recession in 2010.

# Consequences of Delinquency

When borrowers fail to make minimum payments on their loans on time, lenders can impose severe consequences. Delinquent borrowers may face increased interest charges at higher default rates, substantial late payment fees, and other financial penalties.

Most importantly, not making loan payments on time can cause severe damage to credit scores. Lower credit scores make it much harder for borrowers to access affordable credit in the future or qualify for financing to make large purchases like cars or homes. 

The impacts of delinquency can therefore snowball, making it increasingly difficult for borrowers to access the credit they need at reasonable rates. Maintaining on-time payments is critical to avoid these damaging ripple effects on access to affordable borrowing options.

# Historical Perspective

The global financial crisis led to a lot of people losing their jobs and making less money. This made it hard for families to pay off what they owed. Lenders also made it way tougher to get new loans during the recession. So late payments hit record highs.

The COVID-19 recession also meant less income for people. But credit card companies offered more help this time. They let people delay or lower payments for a while. Government money through higher unemployment benefits helped families keep paying what they owed.

When comparing levels of consumer debt worldwide, American households stand out for carrying some of the highest credit card balances relative to income according to research. This heavy reliance on credit card borrowing makes U.S. consumers more vulnerable to economic drawbacks that can quickly spill over into higher delinquency rates when incomes decline.

# Factors Influencing Credit Card Delinquencies

Several economic trends influence the ability of households to repay their credit card bills on time.

# Impact of Job Loss

Rising unemployment during recessions is strongly correlated with higher delinquency rates. Job loss cuts off income required to make minimum payments.

# Tighter Credit Conditions

Lenders tend to tighten credit standards during downturns by:

Removing promotional 0% APR offers

Raising interest rates

Lowering credit limits

This reduces access to additional credit that borrowers frequently use to refinance existing debt. The higher interest costs also make debt servicing more expensive.

# Government Support

During the pandemic, government benefits and lender flexibility prevented a spike in delinquencies despite job losses. Whether these measures can continue mitigating future risks remains to be seen.

# Analyzing Delinquencies: A Deep Dive into Age and ZIP Code Data

To understand the factors affecting delinquency rates, we need to dig deeper into the data across different demographic segments.

# Defining Delinquency

A credit card account is considered delinquent when payment is 30 days past the due date. At 60 or 90 days past due, the delinquency is classified as serious.

Here is a bar chart comparing delinquency rates across age groups:

![](https://hackmd.io/_uploads/r1MqtfMea.jpg)



Source: New York Fed

This shows credit management skills tend to improve with age. Income instability among younger cohorts also contributes to higher delinquency rates.

# Financial Distress Across Regions

Certain ZIP codes stand out for their consistently high credit card delinquency rates across age groups:

Miami, FL (33142): 13.7%

Houston, TX (77036): 11.2%

Chicago, IL (60620): 10.6%

These alarming stats point to deeper socioeconomic factors at play.

# Understanding the Percentage of Debt in Delinquency

Just looking at late payments doesn't show the financial struggles people are having. We also need to see what percent of total credit card debt is late.

Overall, the total dollars of late credit card balances are a lot lower than before the pandemic. But debt that's 90+ days late has been slowly going up over the past year.

Younger people tend to have a bigger share of their credit card balances way past due compared to older folks. This shows ongoing money issues for millennials and people from the latest generations.

Certain ZIP codes stand out for deep, long-term money troubles. In these neighborhoods, up to half of credit card balances are 90+ days late across age groups.

This points to built-in economic disadvantages driven by things like joblessness, low wages, lack of savings, and limited access to affordable loans.

# Frequently Asked Questions

# How do credit card delinquency rates in 2023 compare to those during the global financial crisis?

While there are similarities in the patterns, the percentage of credit card accounts in delinquency for younger individuals is near the GFC average. However, the delinquent debt as a fraction of total credit card debt is smaller.

# What factors have contributed to the rise in credit card delinquencies in recent years?

Several factors, including job losses during recessions, tightening of credit conditions, and removal of promotional offers, have played a role.

# Are certain age groups or regions more susceptible to credit card delinquencies?

Younger people, especially those aged 20-39, tend to have higher delinquency rates. Additionally, the most financially unstable ZIP codes consistently show higher rates of delinquency across all age categories.

# In Conclusion

Analyzing credit-card delinquency data reveals rising financial stress among U.S. households amid tightening economic conditions. However, targeted support and prudent borrowing can potentially help households avoid falling into a debt trap.

The trends need to be monitored carefully to understand the trajectory of economic recovery and make reforms in policies for better financial stability.