Many consumers are sticking to just the minimum payments on their credit card bills, according to a recent report from the Federal Reserve.
The data, covering through Q3 2024, revealed that over 10% of consumers were simply getting by, continuing a three-year trend. As average credit card interest rates have surged, delinquencies have also risen, reaching their highest point in over a decade.
“The economy is still in tender shape and credit card managers should be aware that there are subtle elements that drive risk,” said Brian Riley, Director of Credit at Javelin Strategy & Research. “The current trend of increased consumers paying only the minimum due is a predictive metric that illustrates household budgets are under continued stress.”
Downfield Risk
The lingering impacts of inflation have put pressure on consumers for years, and there has been much speculation about whether these conditions will persist or if improvement is imminent.
To provide a clearer picture of consumers’ situation, Riley highlighted two salient indicators from the Federal Reserve data:
- 30-day delinquency rose by 10% to 3.52% in Q3 2024, signaling continued deterioration in new delinquent accounts.
- The number of consumers making only the minimum payment during this period climbed to 10.75%, up by 9%.
“What is important here is that not all card segments are showing signs of stress, but the most fragile segments—those with low FICO Scores, lower incomes, and less experience with credit—indicate downfield risk in 2025,” Riley said. “When you consider that revolving consumer debt is at an all-time high, the problems of inflation continue to stress household budgets, and issuers must keep a keen eye on vulnerable portfolio indicators.”
Long-Term Solvency
Concerns about mounting credit card debt were brought forward in the results of this year’s DFAST stress tests, which were designed to measure how major U.S. financial institutions would respond to a hypothetical set of negative economic events.
The tests found that banks would face total credit losses of roughly $684 billion, with $175 billion from consumer credit card losses alone. These indicators suggest that credit card firms should prioritize long-term solvency over short-term profits.
“Credit card issuers surely make increased income when consumers pay only their minimum due payments, but the revenue is short lived when chargeoffs move towards 6% to 7%,” Riley said. “That is far beyond the 3.5% comfort zone issuers managed two years ago.”
