Rising credit card balances and a record number of people making only minimum payments signal growing financial strain for consumers.
In the third quarter of 2024, 10.75% of active credit card accounts paid only the minimum balance, the highest rate in 12 years, the Philadelphia Federal Reserve Bank reported.
The trend reflects increasing reliance on credit cards amid higher costs for merchandise and inflation.
Revolving credit card balances hit $645 billion, representing 71% of total card balances, according to the data.
It's up from 65% in 2021 with delinquencies also rising.
The Federal Reserve's overnight lending rate, which is closely tied to consumer loan rates, is between 4.25% and 4.50%.
After years of lower interest rates, the higher rates for the past two years have exacerbated the issue, making it more expensive for consumers to carry balances.
These higher Fed rates, aimed at curbing inflation, have also tightened credit access as banks adopt stricter lending standards for consumers.
Credit card defaults are at the highest levels since 2010, reported industry data collected by BankRegData.
The holidays played a big factor in consumers incurring more debt.
Research by LendingTree showed 1 in 3 Americans took on holiday debt with credit card spending accelerating in December as consumers spent money on dining and retail.
More than 1 in 10 people said the holidays "blew up" their credit card debt.
