Dive Brief:

• Nearly six in 10 low-income consumers (59%) had a credit card as of the third quarter this year, according to a new report from the Federal Reserve Bank of New York.
• Meanwhile, 75% of high-income consumers had access to credit cards in the third quarter, showing inequities in access to credit, the Fed said. The statistics highlight low-income earners’ “limited ability to smooth consumption during periods of unemployment and disruptions to income,” the report said.
• Delinquencies for all credit card holders began rising in 2022, following a drop during the COVID-19 pandemic, and surpassed pre-pandemic levels in the third quarter, with the delinquencies more widespread in low-income areas, the Fed noted. “Lower-income areas have seen higher delinquency rates compared to high-income areas,” the January report said.

Dive Insight:

The Fed’s report documented the financial squeeze that creditors, especially low-income consumers, were experiencing in recent years, due to rent, auto and credit card payments.

More than half of low-income (57%) and moderate-income (53%) consumers were rent-burdened in 2021, meaning that they were directing more than 30% of their household’s monthly income to rent. By contrast, 47% of middle-income and 44% of high-income households are rent-burdened, the report said.

About a quarter (24%) of mortgages in low-income communities were refinanced, a smaller share than 42% of mortgages that were refinanced in high-income areas during a period of low interest rates between 2020 and 2021, per the report. That meant fewer low-income borrowers benefited “from reduced rates and monthly costs,” the report said.

Recent Federal Reserve research suggests that millennials are also particularly burdened by credit card debt. In a report released last November, the New York Fed’s Center for Microeconomic Data found that millennials’ credit card delinquency rate exceeded pre-pandemic levels, but Gen X and Gen Z consumers were consistent with pre-pandemic levels. 

Other research suggests that consumers are struggling with their credit card debt overall. According to a recent survey by the media and market research firms Bankrate and YouGov, 49% of credit card holders carried a balance from month to month in November of last year, up from 39% in 2021. Less than half (43%) of the nearly 1,800 cardholder survey respondents attributed the monthly balance carry-over to an emergency or unanticipated expense.

Bankrate’s research, conducted between Nov. 28 and 30, 2023, paints another view of generational credit card debt differences. While 55% of Gen Xers said they carry credit card debt, millennials followed in a close second at 51%, followed by Gen Z (48%) and baby boomers (44%), according to the survey results.

“Over the past two years, Americans’ credit card balances have skyrocketed 40 percent, according to the New York Fed,” Bankrate senior industry analyst Ted Rossman said in his firm’s report. “And most cardholders’ rates have risen five-and-a-quarter percentage points during that span as a result of the Fed’s rate hikes meant to combat inflation. It’s no wonder, then, that we’re seeing more people carrying more debt for longer periods of time.”