A record number of consumers are making minimum credit cards payments

More Consumers Sticking to Minimum Credit Card Payments, Fed Report Finds

A growing number of consumers are making only the minimum payments on their credit card bills, according to a recent Federal Reserve report.

The data, which covers up to Q3 2024, revealed that over 10% of consumers were barely keeping up with their balances, continuing a three-year trend. As average credit card interest rates have surged, delinquencies have also climbed, reaching their highest level in over a decade.

“The economy is still in a fragile state, and credit card managers need to recognize the subtle factors that drive risk,” said Brian Riley, Director of Credit at Javelin Strategy & Research. “The increase in consumers paying only the minimum due is a key indicator that household budgets remain under significant strain.”

Rising Delinquencies & Financial Stress

The long-term effects of inflation have squeezed consumer finances for years, leading to speculation about whether conditions will improve or continue to deteriorate.

To illustrate the state of consumer credit health, Riley pointed to two key trends from the Federal Reserve’s data:

• 30-day delinquencies rose by 10% to 3.52% in Q3 2024, signaling a worsening trend in new delinquent accounts.
• The percentage of consumers making only minimum payments increased to 10.75%, a 9% jump.

“Not all credit card segments are showing stress,” Riley noted. “But the most vulnerable groups—those with lower FICO scores, lower incomes, and limited credit experience—pose significant risks heading into 2025.”

With revolving consumer debt at an all-time high and inflation continuing to strain household budgets, lenders must closely monitor their most at-risk portfolios to prevent deeper financial distress.

Long-Term Stability at Risk

Concerns over rising credit card debt were underscored by this year’s DFAST stress tests, which measure how major U.S. banks would respond to a hypothetical economic downturn.

The results showed that banks would face total credit losses of $684 billion, with $175 billion stemming from credit card defaults alone. This suggests that credit card issuers must prioritize long-term financial stability over short-term profit gains.

“Issuers do profit when consumers only make minimum payments, but that revenue is short-lived if charge-offs climb to 6% or 7%,” Riley warned. “That’s well above the 3.5% risk threshold issuers were managing just two years ago.”

With delinquencies rising and consumer budgets under pressure, the financial sector will need to tread carefully in 2025 to avoid deeper economic fallout.