One concerning trend heading into the holiday shopping season is the rise in credit card delinquencies among the lowest-income households, even as consumers anticipate putting more spending on their cards.
Since July, 60-day delinquency rates have climbed 11% year-over-year for lower-income households, according to data from VantageScore. Middle-income groups have seen a smaller increase of 6%, while delinquency rates among high-income households have declined.
VantageScore classifies lower-income households as those earning less than $45,000 annually and high-income households as those earning more than $150,000. The company also reported a continued gradual shift toward lower credit tiers: subprime and near-prime segments have both edged higher over the past year, while prime and super-prime segments have contracted slightly.
Across all borrowing categories, late-stage delinquencies—accounts more than 90 days past due—inched up to 0.23% in October, marking their highest level since before the pandemic.
More Holiday Credit Spending
The problem may worsen over the holidays, especially given that borrowing is already at a five-year peak. While VantageScore reported that the average credit card balance held steady at $6,400 in October, the average overall credit balance inched up to $106,700. That figure is more than $1,000 higher than last October, signaling that consumers are increasingly relying on credit to cover everyday expenses.
Separate research from TransUnion indicates that shoppers intend to lean even more heavily on credit cards this holiday season. Nearly half of respondents say credit cards will be their preferred payment method this year, up from 38% during the same period in 2024. More than half also expect to spend more over the holidays.
Risk for Younger Borrowers
VantageScore attributes the rise in delinquencies to persistent inflation and a softening labor market, both of which are having an outsized impact on financially vulnerable households. Tighter access to credit may also be playing a role. While credit card originations were flat in October, they declined among Gen Z borrowers, who remain particularly susceptible to lending constraints.
The latest statistics compiled by Javelin Strategy & Research show that nearly 10% of credit card holders in the younger segment are now 90-plus days delinquent—almost double the rate for those ages 60 to 69.
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