Consumers Make Minimum Credit Card Payments as Inflation Takes a Bite

In signs of continued pressure in the paycheck-to-paycheck economy, more consumers are making only the minimum payments on their credit cards.

And the debt on those cards is rising.

The balancing act between running in place, so to speak, on that card debt and falling into delinquency status is getting tougher to navigate. Delinquencies are rising.

Accounts that are 30-plus days and 60-plus days past due have hit a high not seen in 11 years, according to fourth-quarter 2023 data from the Federal Reserve Bank of Philadelphia released Wednesday (April 10). The share of accounts making full balance payments barely budged, up 0.08% in the fourth quarter, while the share of accounts making only the minimum payments was up 0.34%.

PYMNTS’ Intelligence data from December indicated that 57% of credit cards are owned by paycheck-to-paycheck consumers, so their payment trends and behaviors may indicate what we’ll see across the credit spectrum at large, especially as inflation remains sticky.

“Card utilization also rose, as is typical at year-end, and consumers with stretched credit lines drew further on those lines,” the Philly Fed reported.

The fourth-quarter Fed data dovetails with PYMNTS Intelligence data, which showed that 80% of paycheck-to-paycheck consumers — at about 60% of the general population — hold a credit card, and hold two cards on average. Forty-three percent of consumers at least occasionally revolve their credit card balances while 65% of struggling consumers do so, representing a rise from 59% seen at the end of 2022.

Younger Consumers Feel the Pinch

The pinch is being most keenly felt by relatively younger consumers, per PYMNTS Intelligence. The portion of Generation X consumers revolving their credit increased by 7 percentage points since November 2022. As measured at the end of last year, the tally stood at more than 54% of Gen X consumers, followed by 45% of bridge millennials and nearly 41% of millennials. Nearly 1 in 3 Gen X borrowers reached their credit limits in the past year.

As to the pressures and the balancing act, headed into the end of the year, PYMNTS found that more than a third of consumers turned to credit products to manage their finances, while 21% of them used credit products as their top strategy.

PYMNTS Intelligence also found that 27% of consumers turn to credit cards when they are faced with unexpected expenses totaling $5,000 or more, and 21% do so when emergency expenses are less than $1,000.

The December data is, of course, more than three months old. The Fed reported last week that as of February, total consumer debt grew at an annualized 3.4% pace. Revolving credit use grew at more than 10% annually.

The tightrope may be fraying.