Credit Card Delinquencies Defy the Doom and Gloom: A Surprising Trend in Q4 2025
The credit card delinquency rate has plummeted to a multi-year low, despite the widespread belief that consumers are financially strained. This unexpected twist raises questions about the true state of the economy and the spending habits of Americans.
By Wolf Richter's analysis, the 30-day-plus delinquency rate on credit cards from commercial banks stood at 2.94% at the end of Q4 (seasonally adjusted), a remarkable drop from previous years. This trend is even more intriguing when considering the following:
- Delinquency Rates in Context: After the 'Free-Money' era, delinquency rates rose but have since trended downward, remaining relatively low over the past 25 years.
- Spending vs. Borrowing: Credit card balances, a reflection of spending, have increased by $69 billion year-over-year, reaching $1.28 trillion. This growth is attributed to both increased consumer spending and price hikes.
- Other Consumer Loans: Personal, BNPL, and payday loans have seen a meager 1.1% growth, far below inflation. These loans often accrue interest, unlike many credit card charges that are paid off monthly.
But here's where it gets interesting: consumers are not only spending more, but they're also in a financially stronger position than one might expect.
Americans are earning record incomes, and there's a record number of consumers driving a surge in electronic purchases, primarily through credit cards. The average consumer's balance sheet is robust, with high homeownership rates, reduced mortgages, and significant investments in stocks, precious metals, and cryptocurrencies. Many also hold substantial cash reserves.
The total credit card and 'other' consumer debt rose to $1.84 trillion year-over-year, yet the debt-to-income ratio remains stable, even improving compared to pre-pandemic and pre-Financial Crisis levels.
Banks are eager to capitalize on this spending spree, offering record credit limits to entice consumers. As a result, available unused credit has skyrocketed to $4.15 trillion. However, third-party collections for defaulted credit card accounts have hit a record low, indicating that consumers are managing their debts effectively.
This analysis challenges the narrative of struggling consumers and invites further exploration of the economic landscape. Are consumers truly tapped out, or is this a sign of resilience and strategic financial management?
For a deeper dive into consumer debt and credit, check out Wolf Richter's quarterly analysis series, including the Q4 2025 reports on auto loans, mortgages, and household debts.
