Key Takeaways:
Americans are falling behind on their credit-card bills at a rate not seen since the aftermath of the 2008 financial crisis.
The percentage of US credit-card balances at least 90 days delinquent rose to 13.12% in the first quarter, the highest in 15 years, as elevated interest rates and persistent inflation strained household budgets.
"When food, housing and healthcare is all more expensive, there is less money to pay off your credit card," said Breno Braga, an economist at the Urban Institute. "More people are faced with decisions — they're more likely to stop paying their credit cards first."
Total credit-card balances reached $1.25 trillion in Q1, the highest first-quarter level since the New York Fed began tracking in 1999, up from $1.18 trillion a year earlier. The average interest rate on cards rose to 21% in February, compared with 14.6% in February 2022, according to a Federal Reserve survey of card-issuing banks. The Q1 figure represented a $25 billion decline from the $1.28 trillion peak hit in Q4 2025, though year-over-year balances still grew 5.9%.
The deterioration in consumer credit quality signals that the Federal Reserve's restrictive policy stance — which has held the federal funds rate above 4.5% since the last cut — is filtering through to household balance sheets. With consumer spending accounting for roughly two-thirds of US economic output, rising delinquency rates could pressure policymakers to accelerate rate cuts that markets currently price for the second half of 2026.
Delinquencies Spread Across Income Brackets
The stress is not confined to low-income borrowers. Urban Institute data shows that 5.6% of credit-card holders were 60 days or more behind on payments in 2025, surpassing pre-pandemic levels. Residents of low-income communities posted an 8% delinquency rate at the 60-day threshold, the highest of any income group, but medium- and high-income communities also saw rates climb to their highest since 2018.
The National Foundation for Credit Counseling reported 24% more clients in January 2026 than a year earlier, with average monthly client volume running 60% higher than in 2018. The group's quarterly financial stress forecast — which predicts delinquency risk based on client metrics — has registered its highest readings since the forecast's inception in 2022.
Private Credit Stress Adds a Second Front
While consumer credit shows strain, the less-regulated private credit market faces even sharper deterioration. Fitch Ratings reported the US private credit default rate reached a record 6% in April 2026, up from 5.8% a year earlier and 200 basis points above the historical average. The Financial Stability Board warned in May that private credit now poses systemic risks to global financial stability.
The divergence is notable: traditional bank consumer loan delinquencies held at 4.8% in Q1 2026, reflecting conservative underwriting and regulatory capital requirements. Private credit funds, which operate with fewer constraints, have concentrated risk in leveraged companies most vulnerable to rate shocks. The last time consumer credit quality deteriorated this sharply was in 2009, when the 90-day delinquency rate peaked at roughly 13% following the financial crisis, according to New York Fed data.
This article is for informational purposes only and does not constitute investment advice.
