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Thursday, May 30, 2024

9 Timely Credit Card Default Statistics (2024)

Credit Card Default Statistics
Marcie Geffner

Written by: Marcie Geffner

Marcie Geffner
Marcie Geffner

Marcie Geffner is an award-winning reporter, editor, and writer. Her stories about banking, credit cards, insurance, economics, small business, and other subjects have been featured by the Los Angeles Times, Washington Post, Bankrate, Credit Karma, Bookmarks Magazine, FOX Business, CNBC, Yahoo! Finance, and dozens of major U.S. newspapers. Her articles have been cited in seven nonfiction books and two U.S. Congressional hearings. She edits nonfiction, memoir, and fiction, and contributes to Kirkus Reviews. Marcie holds a bachelor’s degree in English from UCLA and MBA from Pepperdine University.

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Edited by: Lillian Guevara-Castro

Lillian Guevara-Castro
Lillian Guevara-Castro

Lillian Guevara-Castro brings more than 30 years of editing and journalism experience to the CardRates team. She has written and edited for major news organizations, including The Atlanta Journal-Constitution and the New York Times, and she previously served as an adjunct journalism instructor at the University of Florida. Today, Lillian edits all CardRates content for clarity, accuracy, and reader engagement.

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Reviewed by: Jon McDonald

Jon McDonald
Jon McDonald

Jon leverages 15-plus years of journalism expertise to inform financial consumers about emerging trends and companies making an impact in the industry. He is most knowledgeable in the areas of budgeting, credit card rewards, and responsible credit use. Jon has a passion for writing and editing, and his articles have appeared in publications produced by The New York Times.

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Millions of people use credit cards on a regular basis without ever failing to make at least the minimum payment every month. But suppose you have a card for which you can’t make the minimum payment for an extended number of months? What happens then? 

At first, your account will be delinquent. Your credit scores will be negatively impacted, and you likely won’t be able to obtain the best new cards. But you may still be able to use your card for more transactions.

If you continue to miss payments, your card company will eventually assume you aren’t going to make any more payments and your account will be in default. At this time, your account may be closed and your debt sold to a collections agency. Your card company will charge off the amount and the agency will attempt to collect the debt from you.

A default typically remains on your credit report for seven years, although its impact can diminish over time if your credit situation improves.

Card defaults aren’t just difficult for individuals. They’re bad for card issuers, as well.

With that in mind, here are nine statistics about card defaults you should know:

1. Banks Charge Off 4.24% of Card Debt

One way to measure card defaults is to track the rate at which banks charge off card debt.

Historically, peak periods for charge-offs have occurred in close proximity to economic recessions. A St. Louis Federal Reserve chart shows that peak charge-off rates occurred in the first quarter of 1992 at 4.91%, in the first quarter of 2002 at 7.65%, in the fourth quarter of 2005 at 6.09%, and in the fourth quarter of 2009 at 10.54%, more than double the rate in the first quarter of 1992.1

However, in 2020-21, the pattern changed. Despite a brief recession triggered by the Covid-19 emergency, bank card charge-off rates dropped to 1.64% in the fourth quarter of 2021, the lowest level in more than 40 years.

charge-off data chart
Charge-offs peaked in Q4 of 2009. Source: Federal Reserve Economic Data

Temporary forbearance extended by banks, enhanced unemployment insurance benefits, government economic stimulus checks, and rental eviction moratoriums likely helped consumers avoid card defaults during this period.

The most recent charge-off rate reported in this data was 4.24% in the fourth quarter of 2023.

2. The Biggest Banks Charge Off 3.96% of Card Debt

The card debt charge-off rate for the 100 largest U.S. banks as an important subset of all U.S. banks has followed a similar pattern.

Peak charge-offs rates occurred in the third quarter of 1991 at 5.35%, in the first quarter of 2002 at 7.61%, in the fourth quarter of 2005 at 5.78%, and in the fourth quarter of 2009 at 10.67%. These peaks for the biggest banks tended to occur slightly sooner than the peaks for all banks, according to a St. Louis Fed chart.2

The most recent charge-off rate for the biggest banks reported in this data was 3.96% in the fourth quarter of 2023.

That rate was slightly lower than the rate for all banks.

3. Smaller Banks Charge Off 9.5% of Card Debt

The card charge-off pattern for smaller banks as a separate subset of all banks has seen more marked peaks and valleys than the pattern for bigger banks, judging by a third St. Louis Fed chart.3

Smaller banks tend to charge off more credit card debt. Source: Federal Reserve Economic Data

The lowest charge-off level for smaller banks during the Covid-19 pandemic was 4.24% in the third quarter of 2021. Compared with the significantly lower level for bigger banks, the level for smaller banks was reached sooner and remained elevated longer.

The most recent charge-off rate for smaller banks was 9.5% in the fourth quarter of 2023.

4. The Big 6 Post a 2.07% Charge-Off Rate

Another way to measure the charge-off rate for card debt is to focus on the six major card companies in the U.S. Together, they reported an annualized net loss charge-off rate of 2.07% in January 2024, according to S&P Global Market Intelligence data.

In January 2024, the individual charge-off rates for each of the six issuers ranked in order from the highest rate to the lowest were:

IssuerCharge-off Rate
Capital One2.69%
Citi2.65%
Bank of America2.06%
Discover2.03%
Chase1.72%
American Express1.30%

That rate was slightly lower than the 2.08% rate at the end of 2023, but still higher than the rate a year earlier.4

5. The Big 6 Post a 1.4% Delinquency Rate

Delinquencies aren’t yet defaults, but they have the potential to become defaults.

In January 2024, the individual card delinquency rates for each of the six card issuers ranked in order from highest to lowest were:

IssuerDelinquency Rate
Capital One2.03%
Discover1.69% 
Citi1.51%
Bank of America1.35%
Chase1.07%
American Express0.82%

The average card delinquency rate for the same six issuers during the same time period was 1.41%, also according to S&P Global Market Intelligence. That rate was less than 0.1% lower than the 1.50% rate in January 2020, two months before the start of the COVID-19 emergency.

6. 8.5% of Card Balances Transition to Delinquency

Approximately 8.5% of all card balances transitioned into delinquency on an annualized basis in the fourth quarter, according to the New York Fed report. This was the highest level since 2011, when card delinquencies were also 8.5%.

Card debt delinquency for the quarter significantly outpaced the delinquency rate for all household debt, which reached 3.1%. This higher level of delinquency for card accounts may signal increased financial stress, especially among younger and low-income households.

7. Total Card Debt Hits $1.13 Trillion

Accounts that are delinquent or in default are one component of total consumer card debt, which rose to $1.13 trillion in the fourth quarter of 2023, according to a New York Federal Reserve statement.5

A jump in total card debt is typical for the fourth quarter of each year, thanks to consumer spending during the year-end holidays. Still, $1.13 trillion is a very big number, and it’s one that went up by $50 billion during the quarter.6

card debt graphic

Part of the increase may have been due to higher card rates, which trigger bigger interest charges for unpaid balances.

8. Total Card Debt is 6.5% of Household Debt

Another way to look at card debt is as a percentage of total household debt, which rose to $17.5 trillion in the fourth quarter of 2023, an increase of $212 billion, or 1.2%.

total debt balance chart
Total debt rose to $17.5 trillion in 2023. Source: FRBNY Consumer Credit Panel/Equifax.

Total household debt includes home, auto, student, and other consumer loans, as well as card debt.

The $1.13 trillion in total consumer card debt represented about 6.5% of total household debt.7

9. Card Issuers Use Email and Texts to Collect Card Debt

As the pandemic waned in 2022, card issuers backed away from hardship forbearance programs and stepped up their use of email and text messages to collect debt from consumers with delinquent card accounts, according to a Consumer Financial Protection Bureau report.

The report also stated that while fewer charge-offs were settled, more accounts in default were deleted from consumer credit reports.8

In Conclusion

For consumers who have a card in default, there are ways to reduce the pain, although none of them are fast or easy.

One strategy is to contact your card company and ask for a payment plan with a lower payment or reduced rate. Another approach is to try to settle the debt for less than you owe in a process known as debt forgiveness. A debt management plan through a nonprofit credit counseling agency may be another option. If none of these strategies work for you,  bankruptcy may be an option. 

Whichever solution you choose, contacting your card company to discuss your situation is usually a good way to start.

Data Sources:

1 https://fred.stlouisfed.org/series/CORCCACBS

2 https://fred.stlouisfed.org/series/CORCCOBS

3 https://fred.stlouisfed.org/series/CORCCT100S

4 https://www.spglobal.com/marketintelligence/en/news-insights/latest-news-headlines/credit-card-delinquency-net-loss-rates-return-to-pre-pandemic-levels-80618274

5 https://www.newyorkfed.org/newsevents/news/research/2024/20240206

6 https://kpmg.com/us/en/articles/2024/q4-2023-hhdacr.html

7 https://www.newyorkfed.org/microeconomics/hhdc.html

8 https://files.consumerfinance.gov/f/documents/cfpb_consumer-credit-card-market-report_2023.pdf