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Total household debt balances increased by $16 billion in the second quarter of 2023, according to the latest Quarterly Report on Household Debt and Credit from the New York Fed’s Center for Microeconomic Data. This reflects a modest rise from the first quarter. Credit card balances saw the largest increase of all debt types—$45 billion—and now stand at $1.03 trillion, surpassing $1 trillion in nominal terms for the first time in the series history. After a sharp contraction in the first year of the pandemic, credit card balances have seen seven quarters of year-over-year growth. The second quarter of 2023 saw a brisk 16.2 percent increase from the previous year, continuing this strong trend. With credit card balances at historic highs, we consider how lending and repayment have evolved using the New York Fed’s Consumer Credit Panel (CCP), which is based on anonymized Equifax credit report data.

Credit Card Issuance

Credit cards are the most prevalent form of household debt and continue to become even more widespread. Consider that there are 70 million more credit card accounts open now than there were in 2019, before the pandemic. What’s more, about 69 percent of Americans had a credit card account in the second quarter of 2023, up from 65 percent in December of 2019 and only 59 percent in December of 2013. And while lending did take a dip during the first year of the pandemic, credit card issuances have been at somewhat elevated levels since.

In the chart below, we depict the opening of new credit card accounts, broken out by the borrowers’ credit scores. Credit card issuance had been fairly steady overall, averaging about 23 million newly issued cards each quarter between 2017-19. The onset of the pandemic caused a sharp retraction in new credit card issuance, with only 13 million cards issued in the second quarter of 2020. But by the second quarter of 2021, lending returned across all credit-score groups.

Subprime borrowers saw a surge in card issuance in 2021 and 2022, although this appears to have softened in the first half of 2023. By contrast, card issuance to borrowers with the highest credit scores— those over 760—expanded during first half of 2023. This relative tightening is consistent with other reports: The July 2023 Senior Loan Office Opinion Survey on Bank Lending Practices (SLOOS) described tightening standards for all consumer loan standards, and our June 2023 SCE Credit Access Survey showed an increase in credit application rejection rates, especially among those with lower credit scores.

Credit Card Issuance by Credit Score

Liberty Street Economics bar chart showing new credit card issuance (in millions of cards) between the first quarter of 2017 and the second quarter of 2023, broken down by the borrower’s credit score at the time of issuance of less than 620, between 620 and 659, between 660 and 719, between 720 and 759, and 760 and above.
Source: New York Fed Consumer Credit Panel / Equifax (Philadelphia Fed Credit Card Detail); Credit scores are Equifax Risk Score 3.0.

Credit Card Delinquency

In February we wrote about increasing delinquency rates and our plan to continue to monitor the situation. Delinquency rates have now returned to pre-pandemic levels. In the chart below, we disaggregate transitions into delinquency by the borrower’s credit score at issuance. This picture is consistent with a return to pre-COVID trends after a stretch of unusually low delinquency rates during the pandemic when forbearance, policy-boosts to income, and limited consumption opportunities meant borrowers were better positioned to repay their debts. The two most recent quarters also appear to show some stabilization. Note that these rates differ from the transition rate calculated in our Quarterly Report because they are unsmoothed and use more detailed data.

Delinquency Rates Level Off
Transition into 30+ Days Delinquency

Liberty Street Economics line chart showing the percent of credit card accounts transitioning into delinquency of 30 or more days past due between October 2016 and June 2023, broken down by the borrower’s credit scores at the time of issuance.
Source: New York Fed Consumer Credit Panel / Equifax (Philadelphia Fed Credit Card Detail); Credit scores are Equifax Risk Score 3.0.

We finally consider debt performance by income, to determine whether aggregate statistics may be masking underlying economic challenges present in lower-income communities. We group borrowers using the average adjusted gross income of their zip code as a proxy for income, using data from the IRS (zip code income). In the heat map style chart below, we depict credit card delinquency aggregated by zip code income, which is shown on the y-axis, with the percentage of delinquency indicated by the color. Here, we first see that lower income areas have historically had higher delinquency rates, whereas higher income areas typically have better debt performance. But, before the Great Financial Crisis, credit card delinquencies were considerably more widespread, even in higher income areas, and rose even more between 2008-10. But now, after a brief period of unusually low delinquency between 2020-22, delinquency rates have normalized at pre-pandemic levels even in lower income areas.

Credit Card Delinquency by Zip Code Income

Liberty Street Economics heat map style chart showing the percentage of credit card delinquency aggregated by zip code income between 2000 and June 2023. After a brief period of unusually low delinquency between 2020-22, delinquency rates have now normalized at pre-pandemic levels even in lower income areas.
Source: New York Fed Consumer Credit Panel / Equifax (Philadelphia Fed Credit Card Detail); IRS Statistics of Income 2020. Calculated as the percentage of balance transitioning quarterly into delinquency (30 or more days past due).

Despite the many headwinds American consumers have faced over the last year—higher interest rates, post-pandemic inflationary pressures, and the recent banking failures—there is little evidence of widespread financial distress for consumers. American consumers have so far withstood the economic difficulties of the pandemic and post-pandemic periods with resilience. However, rising balances may present challenges for some borrowers, and the resumption of student loan payments this fall may add additional financial strain for many student loan borrowers. Even so, thus far, household credit shows some early signs of stabilizing at pre-pandemic health, albeit with higher nominal balances.

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Photo: portrait of Andrew Haughwout

Andrew F. Haughwout is interim director of research and head of Federal Reserve Bank of New York’s Research and Statistics Group.

Portrait of Donghoon Lee

Donghoon Lee is an economic research advisor in Consumer Behavior Studies in the Federal Reserve Bank of New York’s Research and Statistics Group.

Daniel Mangrum is a research economist in Equitable Growth Studies in the Federal Reserve Bank of New York’s Research and Statistics Group.

Photo: portrait of Joelle Scally

Joelle Scally is a regional economic principal in the Federal Reserve Bank of New York’s Research and Statistics Group.

Photo: portrait of Wilbert Vanderklaauw

Wilbert van der Klaauw is the economic research advisor for Household and Public Policy Research in the Federal Reserve Bank of New York’s Research and Statistics Group.

How to cite this post:
Andrew Haughwout, Donghoon Lee, Daniel Mangrum, Joelle Scally, and Wilbert van der Klaauw, “Credit Card Markets Head Back to Normal after Pandemic Pause,” Federal Reserve Bank of New York Liberty Street Economics, August 8, 2023, https://libertystreeteconomics.newyorkfed.org/2023/08/credit-card-markets-head-back-to-normal-after-pandemic-pause/.


Disclaimer
The views expressed in this post are those of the author(s) and do not necessarily reflect the position of the Federal Reserve Bank of New York or the Federal Reserve System. Any errors or omissions are the responsibility of the author(s).

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