American credit-card delinquencies have surged to a 13-year high, with 11% of credit-card debt in serious delinquency by the end of 2024. This increase, which reflects financial strain, is concentrated among young, low-income, and subprime borrowers. Rising interest rates, which have caused average credit-card rates to exceed 21%, are exacerbating the problem, as borrowers face immediate impacts, unlike homeowners with long-term mortgages.
Rising delinquency rates foreshadowed the Great Recession in the late ‘00’s. Nevertheless, rising delinquencies are not necessarily indicative of an impending economic collapse. Most households’ finances remain stable, and credit-card debt is still in line with historical norms. However, smaller banks, which have targeted riskier borrowers, report higher delinquency rates compared to larger institutions. Banks are starting to tighten lending standards, and delinquency rates are expected to stabilize in 2025. Despite this, borrowers facing financial hardship will continue to struggle as high interest rates persist.