Younger Borrowers Are Falling Behind on Credit Card and Car Loans

A father holds his sleeping baby while he looks at bills.

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  • Growing numbers of borrowers in their 20s and 30s started to fall behind on their credit card and car payments in the fourth quarter of 2022. 
  • Delinquency rates have likely jumped because loans have higher interest rates and inflation is putting pressure on household budgets.
  • Younger borrowers could be hit even harder in the coming months when payments on federal student loans resume.

Many twenty and thirty-something borrowers are falling behind on their car and credit card payments, hurt by economic forces that are squeezing household budgets

While borrowers of all ages had an uptick in delinquency in the fourth quarter of 2022, the trend was especially pronounced in younger age groups, according to a report from the Federal Reserve Bank of New York. Of those in their 30s, 3.2% fell three months behind on credit cards and 1.2% did the same with car loans, and those in their 20s fell into 90-day delinquency at a rate of 2.9% for credit cards and 1.4% for car loans, both topping pre-pandemic levels.

Household finances are under pressure because of high inflation and the Federal Reserve’s interest rate hikes meant to combat it. Rate hikes have raised borrowing costs for car loans, credit cards, and other kinds of consumer debt and those trends have hit younger borrowers harder than other age groups, according to the Fed’s research on household debt released Thursday. 

The budgets of younger borrowers could get stretched further when the reprieve on payments for federal student loans ends later this year, pending the Supreme Court’s decision on President Joe Biden’s student loan forgiveness plans, economists at the New York Fed said in a blog post. 

The growing number of delinquencies doesn’t pose much risk to lenders or the broader financial system because lower-balance loans are the ones most likely to fall behind, the Fed researchers wrote. For individuals, though, “This financial distress is real, and the delinquent marks will impact their access to credit for years to come,” they said.

The jump in delinquencies was part of a broader trend of increasing household debt shown in the Fed’s consumer credit report. Total debt rose to $16.9 trillion in the fourth quarter of 2022, setting a new record, as it has every quarter since the second half of 2020.

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  1. Federal Reserve Bank of New York. "Younger Borrowers Are Struggling with Credit Card and Auto Loan Payments."

  2. Federal Reserve Bank of New York. "Household Debt Rises to $16.90 Trillion; Credit Cards Pass Pre-Pandemic High."