Debt from credit cards hit a record high in 2019, driven by young borrowers and aggressive spending, according to The Wall Street Journal. Despite a healthy economy and robust job market, the number of people who fell behind on payments increased.
The total balance on credit cards went up by $46 billion to $930 billion, higher than the previous peak hit just ahead of the financial crisis of 2008. The data comes from the Federal Reserve Bank of New York, and was released on Tuesday (Feb. 11).
Serious delinquent credit card debt is classified as payments that are late by 90 days or more. That number went up to 5.32 percent in Q4, the highest it has been in about eight years — iIt was 5.16 percent in Q3. The rate for serious delinquency among borrowers aged 18 to 29 years went up almost 10 percent to its highest level since Q4 of 2010 at 8.91 percent.
“There are increases in the credit card delinquency rate that make you wonder whether some parts of the population are not doing as well, or whether this is just a result of more relaxed lending standards,” said Wilbert van der Klaauw, senior vice president at the New York Fed. “It’s something we are looking into.”
Even when the holiday season spending was taken into account, the Q4 gain was a substantial one. However, the reclassification of debt on retail cards as credit cards accounted for some of the jump.
Consumer credit has been expanding in recent years, and the rise in credit card balances is an apparent effect of that. The growth started with student and automobile debt, then creeped into credit card and mortgage debt. The economy has been growing for 11 years, and unemployment is at the lowest place it’s been in 50 years.
Mortgage debt went up $120 billion, reaching $9.56 trillion in Q4, and was spurred on by a spike in mortgage refinancing as interest rates continue to drop.
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