Bold opening: Even as headlines warned of overwhelmed borrowers, credit card delinquencies slipped to multi-year lows and stayed remarkably resilient amid a high-cost environment. And this is where the story gets nuanced, because the numbers reveal both relief and risk in different corners of consumer finances.
By Wolf Richter for WOLF STREET.
The 30-day-plus delinquency rate on credit cards issued by all U.S. commercial banks fell to 2.94% at the end of Q4, seasonally adjusted. This matches the pre-pandemic level seen in Q3 2023 and marks a decline from 3.08% a year earlier and 3.10% two years ago, according to Federal Reserve regulatory reports. The figure includes accounts from subprime borrowers as well. When not seasonally adjusted, the rate stood at 3.03%, the lowest for any Q4 since 2022.
During the so-called Free-Money era, delinquency rates dipped to unusually low levels. After that period ended, rates rose briefly, then began trending lower again in 2024. Across the entire span, delinquency levels remained comparatively low by the long historical context.
A quick note on what “balances” measure: credit card balances reflect statement totals before payments are made. They indicate spending activity more than borrowing in the traditional sense, because most charges are paid by the due date and do not accrue interest.
Credit cards have become the dominant form of consumer payment in the United States, largely supplanting checks and cash. Debit cards are the second-most popular method. For economists and market watchers, card balances are a barometer of consumer spending growth rather than just debt accumulation.
At the end of Q4, total credit card balances rose by $69 billion year over year, up 5.7% to $1.28 trillion. This uptick mirrors ongoing spending strength and price pressures, according to the New York Fed’s Household Debt and Credit report based on Equifax data.
The data here are not seasonally adjusted. Spending typically surges in the holiday period and then slows in Q1, which aligns with the observed bounce in spending growth across the latest quarter.
Other types of consumer loans—covering personal loans, Buy-Now-Pay-Later (BNPL) arrangements, and payday loans—edged up by 1.1% year over year to $560 billion, a pace well below inflation. Most of these balances, with the exception of current BNPL balances, accrue interest. Over the past 22 years, these loans have shown only modest growth despite population, income, inflation, and spending increases.
The contrast between falling delinquencies and rising balances isn’t mysterious. Households are reporting record incomes and a growing number of households overall, while purchasing activity—especially online and electronically—remains robust and card-based.
Taken together, household balance sheets look healthier than one might fear. About 65% of households own their homes, and roughly 40% of homeowners are mortgage-free or have small mortgages remaining. More than 60% of households hold some stocks, and many also hold precious metals or crypto assets. A sizable portion is sitting on substantial cash in interest-bearing accounts
(https://wolfstreet.com/2026/01/12/household-money-market-funds-large-cds-hit-records-despite-lower-yields-but-sorry-its-not-cash-on-the-sidelines/).
Credit card debt, combined with other consumer debt, rose by $75 billion year over year, or 4.2%, to a total of $1.84 trillion. A traditional measure of debt burden is the debt-to-disposable-income ratio. Disposable income represents after-tax earnings available for living costs, debt service, saving, and investment. It excludes capital gains, which means the wealthiest households aren’t fully represented in this metric.
In Q4, the ratio of credit card and other consumer loan balances to disposable income stood at 8.0%, the same level reached in Q4 2024 and Q4 2023, and notably below the pre-pandemic years. This shows the burden of ongoing credit card and related debt remains manageable for many households, even as nominal balances rise.
Banks continue to compete aggressively to grow card portfolios because card transactions generate substantial swipe-fee income. To entice usage, issuers offer incentives like 1%–2% cash back, loyalty points, or travel miles. The logic is straightforward: higher spending translates into higher revenue for lenders.
As a result, aggregate credit card limits rose to a record $5.4 trillion, outstripping outstanding balances. Available, unused credit reached a new high of about $4.15 trillion, underscoring how much capacity remains for consumer borrowing within existing lines.
Third-party collections reached a record low. In credit reporting terms, a loan is typically assigned to a collection agency when a lender reports delinquency to credit bureaus (such as Equifax) and sells the debt for pennies on the dollar. The share of consumers with such third-party collection entries fell to a fresh low of 4.6% in Q4.
This completes my four-part quarterly examination of consumer debt and credit. If you’d like to explore more, here are the companion pieces:
- Serious Delinquency Rates for Subprime & Prime Auto Loans, Balances, and Debt-to-Income Ratio in Q4 2025
- Here Come the HELOCs: Mortgages, Housing-Debt-to-Income-Ratio, Serious Delinquencies, and Foreclosures in Q4 2025
- Household Debts, Debt-to-Income Ratio, Delinquencies, Collections, Foreclosures, and Bankruptcies in Q4 2025
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A featured note: Daily Market Insights by Chris Vermeulen at TheTechnicalTraders.com.
Would you like this analysis to dive deeper into how these trends might influence spending in 2026, or would you prefer a version focused more on what this means for a specific group (e.g., new borrowers, homeowners, or students) with practical tips?
