Skip to content

Delinquency Rate on Credit Card Loans at Historical Low

Monday, September 22, 2014

By Juan M. Sanchez, Senior Economist, and Lijun Zhu, Technical Research Associate

It is well known that labor markets have been improving slowly but steadily since the end of the recession. A similar trend, perhaps less noticed, is observed in delinquent loans (those past due 30 days or more and still accruing interest as well as those in nonaccrual status) measured as a percentage of end-of-period loans, or the delinquency rate.

The figure below presents the delinquency rate from the first quarter of 1991 (when data became available) through the second quarter of 2014. During the Great Recession, the delinquency rate reached a record high of almost 7 percent. Since 2010, however, it has decreased continuously, reaching its prerecession level in the third quarter of 2010 and its historical low of 2.3 percent in the second quarter of 2014, the latest available data period.

Delinquencies on credit card loans usually occurs when households suffer from unfavorable economic shocks such as unemployment. Since the incidence of those shocks increases during recessions, the delinquency rate on credit card loans shown above increases during recessions (which are signified by the chart’s shaded areas). Thus, a natural candidate to account for the declining trend in the delinquency rate is the improvement in labor markets.

However, since the labor market was arguably better in 2004-06 when the delinquency rate was significantly higher than today, there must be another reason for the current record low rate. The deleveraging of U.S. households since the start of the recession is probably part of the answer . While the mean credit card balance of all U.S. households at the beginning of the recession was $3,538, it was only $2,791 (21 percent) at the end of it.

Additional Resources

Posted In Financial  |  Tagged credit cardsjuan sanchezlijun zhu
Commenting Policy: We encourage comments and discussions on our posts, even those that disagree with conclusions, if they are done in a respectful and courteous manner. All comments posted to our blog go through a moderator, so they won't appear immediately after being submitted. We reserve the right to remove or not publish inappropriate comments. This includes, but is not limited to, comments that are:
  • Vulgar, obscene, profane or otherwise disrespectful or discourteous
  • For commercial use, including spam
  • Threatening, harassing or constituting personal attacks
  • Violating copyright or otherwise infringing on third-party rights
  • Off-topic or significantly political
The St. Louis Fed will only respond to comments if we are clarifying a point. Comments are limited to 1,500 characters, so please edit your thinking before posting. While you will retain all of your ownership rights in any comment you submit, posting comments means you grant the St. Louis Fed the royalty-free right, in perpetuity, to use, reproduce, distribute, alter and/or display them, and the St. Louis Fed will be free to use any ideas, concepts, artwork, inventions, developments, suggestions or techniques embodied in your comments for any purpose whatsoever, with or without attribution, and without compensation to you. You will also waive all moral rights you may have in any comment you submit.
comments powered by Disqus

The St. Louis Fed uses Disqus software for the comment functionality on this blog. You can read the Disqus privacy policy. Disqus uses cookies and third party cookies. To learn more about these cookies and how to disable them, please see this article.