Credit Card Charge-Offs and Delinquencies Increased to More Than a 12-year High, According to Federal Reserve’s Q2 Data.

http://www.insidearm.com/news/00050077-credit-card-charge-offs-and-delinquencies/

Editor's Note: This article was authored by Provest's Head of Credit Collections Business Development and Client Relations, Joel Rosenthal, and has been republished here with permission. ProVest content—and all insideARM articles—are protected by copyright. All rights are reserved.

Credit card charge-offs and credit card loan delinquencies continue to be at a more than 12-year high, according to the Federal Reserve’s second-quarter report.

Second quarter 2024 data reveals that credit card charge-offs increased from 4.16% to 4.38%, a 12.5-year high not seen since Q4 2011. Charge-offs are continuing to increase at a fairly steep slope. With 9–12-month lag time to placements, the volume should continue to increase through at least mid-2025.

Credit card loan delinquencies, a six-to-nine-month early indicator of the charge-off rate, increased from 3.02% to 3.11%, also a 12.5-year high. After the Q1 data release, it appeared that delinquencies might be peaking; however, last quarter’s data shows a possible new increase in velocity.

It is important to note the context of the increasing delinquency rates. Credit card lending and delinquencies both increased year over year: YOY delinquencies increased by about 0.5% from 2.63% to 3.11%, credit card lending increased by 10.8% to $1.142 trillion from $1.031 trillion. A larger lending pool AND a higher percentage of delinquencies mean firms can reasonably anticipate a high workflow level into mid-2025.