Dive Brief:

• U.S. consumer credit card balances in the second quarter rose 4.6% over the previous quarter, reaching a high of $1.03 trillion, according to a report released Tuesday by the Federal Reserve Bank of New York’s Center for Microeconomic Data.
• Credit card accounts rose by 5.48 million to 578.35 million during the second quarter, according to the report. Aggregate limits on credit card accounts climbed $9 billion, reaching $4.6 trillion.
• The share of credit card balances entering serious delinquency, defined as delinquent for 90 days or more, was 5.08% in the second quarter, up from 3.35% in the same quarter last year, the report said.

Dive Insight:

After exceeding pre-pandemic levels earlier this year, the Fed’s latest data illustrate increasing consumer reliance on credit cards. In the fourth quarter of last year consumer credit card balances rose 6.6% over the previous quarter, to $986 billion, surpassing the pre-pandemic high of $927 billion.

The fourth quarter’s $61 billion jump was the largest since the Fed began tracking the statistic in 1999. 

In the second quarter, credit card balances saw “the most pronounced worsening in performance” compared to other debt categories such as housing and student loan debt, the Fed release noted. Total household debt reached $17.06 trillion in the second quarter, led by credit card balances, the New York Fed said.

However, despite inflation and higher interest rates, there is little evidence of widespread consumer financial distress, Fed researchers said in an accompanying blog post. 

“Credit card balances saw brisk growth in the second quarter,” Joelle Scally, administrator of the Center for Microeconomic Data, said in a statement. “And while delinquency rates have edged up, they appear to have normalized to pre-pandemic levels.”

The Fed’s findings follow previous predictions and reports of climbing delinquencies. Last December, credit reporting agency TransUnion projected an increase in delinquencies due partly to inflation constraints on consumers’ finances. 

The uptick in delinquencies is impacting some credit card issuers. In April, American Express and Discover Financial Services reported that their first-quarter profits declined by 13% and 21%, respectively. In June, Amex’s delinquency rate was 1.1%, compared to 0.7% for the same period in 2022. Discover’s delinquency rate was 2.9%, compared to 1.8% the year before.

Both issuers also allocated more funds to cover loan losses in response to rising delinquencies and charge-offs. Other financial firms such as Synchrony Financial and Bread Financial have also reported higher charge-offs and delinquencies this year. Synchrony’s delinquency rate in June was 3.8%, compared to 2.7% for the same period one year earlier, while Bread’s delinquency rate was 5.5%, compared to 4.4% one year prior.