Credit Card Delinquencies Reach Highest Level in Over a Decade

Americans are falling farther behind on credit card bills as researchers say the share of delinquent balances just reached troubling new levels.

The Federal Reserve Bank of Philadelphia, which has tracked credit card delinquencies since 2012, reports that the situation has never been worse.

“All measures of balance-based credit card delinquency rates posted their highest levels in the nearly 12-year history of the series,” researchers said in a report Wednesday.

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The Philadelphia Fed's data for the first quarter of the year shows that borrowers with delinquent accounts are getting deeper in debt. Their rising debt loads caused the share of balances that are 60 days past due to increase, even as the number of delinquent accounts trended down quarter-to-quarter.

“Although the share of accounts falling behind on payments was smaller, account holders who are behind have larger balances left unpaid,” the report said.

According to the report, typical seasonal trends (related to holiday spending) led to that decrease in delinquent accounts in the first quarter.

Delinquent credit card balances soar

Rising credit card delinquencies are one of the weaknesses in an economy that overall has many bright spots, and it could be an indication that households are struggling to pay the bills following high inflation in recent years.

A credit card balance is a type of revolving debt. Revolving debt affects your credit score, which is one of the reasons it’s important to stay on top of your credit card balances — not to mention that interest rates on credit card debt are often 25% or higher.

If you don’t pay off your balance each month, or if your utilization is too high, your score will suffer and lenders will be less likely offer you the best rates on products including auto loans and mortgages.

According to the Philadelphia Fed, total revolving balances were at $628.6 billion in the first quarter, which was also a series high.

What to do if you can't pay your credit card bill

As the data in this report makes clear, you're not alone if you're struggling to pay off credit card debt.

Personal loans or balance transfers to another credit card can potentially help you avoid late payment fees and mitigate damage to your credit. But a long-lasting solution for getting out of debt often takes more work.

If you have struggled to responsibly manage a credit card in the past, you'll need to adjust your spending habits so you can pay above the minimum payment.

Experts recommend sticking to a monthly budget and coming up with a plan to regularly chip away at the debt, starting with the highest-interest rate accounts. Most importantly, avoid adding on new credit card debt or opening additional credit cards that will tempt you to borrow even more.

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