• Credit card delinquencies surged more than 50% in 2023 as total consumer debt swelled to $17.5 trillion, the New York Fed reported Tuesday.
• Total debt rose by $212 billion in the quarter, a 1.2% increase quarterly and about 3.6% from a year ago.

Credit card delinquencies surged more than 50% in 2023 as total consumer debt swelled to $17.5 trillion, the New York Federal Reserve reported Tuesday.

Debt that has transitioned into "serious delinquency," or 90 days or more past due, increased across multiple categories during the year, but none more so than credit cards.

With a total of $1.13 trillion in debt, credit card debt that moved into serious delinquency amounted to 6.4% in the fourth quarter, a 59% jump from just over 4% at the end of 2022, the New York Fed reported. The quarterly increase at an annualized pace was around 8.5%, New York Fed researchers said.

Delinquencies also rose in mortgages, auto loans and the "other" category. Student loan delinquencies moved lower as did home equity lines of credit. Overall, 1.42% of debt was 90 days or more past due, up from just over 1% at the end of 2022.

"Credit card and auto loan transitions into delinquency are still rising above pre-pandemic levels," said Wilbert van der Klaauw, economic research advisor at the New York Fed. "This signals increased financial stress, especially among younger and lower-income households."

While delinquency levels are rising, the New York Fed researchers said total debt is moving higher about in line with the pace before the Covid-19 pandemic began in March 2020.

Household debt rose by $212 billion in the quarter, a 1.2% increase quarterly and about 3.6% from a year ago. Credit card debt, however, jumped 14.5% from the same period in 2022. Auto debt climbed to $1.61 trillion, up $12 billion on a quarterly basis and $55 billion annually, or 3.5%.

Borrowers have been hit by higher interest rates. In a tightening cycle that ran from March 2022 to July 2023, the Federal Reserve hiked its short-term borrowing rate by 5.25 percentage points, taking the fed funds rate to its highest level in about 23 years. The benchmark rate feeds into most adjustable-rate consumer debt products.

Since the central bank began its tightening, the typical rate on credit cards leaped from about 14.5% to 21.5%, according to Fed data. Credit card debt as a share of income is still below pre-pandemic levels.

While the rise in delinquencies happening from low levels, the trend "bears watching because it is happening while the economy is still growing," said Joseph LaVorgna, chief economist at SMBC Nikko Securities.

"What happens if the economy slows and unemployment quickly rises? Delinquencies could surge, in turn leading to a self-reinforcing credit crunch," LaVorgna said in a note. "In other words, a mild downturn could turn into a deep one."

Fed researchers said rising rates probably have played a role in delinquency rates. In the case of autos, for instance, they said payments have changed little even as prices have come down, owing to the elevated rate structure.

Student loan debt, an area of interest for Washington lawmakers, has increased little during the pandemic period, currently totaling just more than $1.6 trillion. That was little change from the third quarter and it was up just 0.4% from a year ago. President Joe Biden has forgiven some $136.6 billion in student loan debt since taking office. The share of debt in serious delinquency edged lower to 0.8%.

Mortgage debt rose 2.8% in 2023, while the delinquency rate increased to 0.82%, up a quarter percentage point from the previous year.

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