Fed Report: Credit Card Delinquencies Show Improvement as Interest Rates Surge

Consumer credit card performance improved during the first quarter of 2025 as total balances on consumer cards fell to $908 billion, from more than $951 billion in 2024’s fourth quarter, according to the Federal Reserve Bank of Philadelphia’s latest credit card report.

The report also indicated that all measures of delinquencies declined on a year-over-year basis.

Improved consumer card performance may cause credit card issuers to see less income stemming from unpaid card balances, but the Fed also reported that card interest rates have soared to “historically high” levels. 

Higher interest rates allow issuers to collect a larger percentage on unpaid balances, which may help offset any decline in revenue an issuer experiences as a result of its customers carrying lower balances from one month to the next.

The Fed report suggests that, at least in part, a higher prime rate is causing growth in card interest rates. The prime rate remained stable at 7.5% throughout the first quarter. But it is still much higher than it was at the beginning of the 2020s, when it wasn’t uncommon to see the benchmark rate fall between 3.25% and 5.5%.

Though fewer borrowers may be behind on paying their monthly credit card bills, those that are missing payments are incurring higher fees for doing so.

General purpose credit cards now have an average annual percentage rate of 24.6%, according to Fed data.

The average annual percentage rate on general-purpose cards is currently 24.6%, according to the Fed report. That figure represents a stark increase over the 20.1% average rate that occurred during the period stretching from Q1 2020 to Q2 2023. 

“Interest rates on credit cards are nearly the highest they have been since the onset of the Large Bank Credit Card and Mortgage Data collection in 2012,” according to the authors of the Fed report.

Average rates are even higher for private label cards at 31.15%. That figure is a high mark in the Fed study series.

Cardholders may be avoiding carrying balances on their cards to sidestep fees, but part of the reduction in delinquencies may be due to stricter underwriting practices.

“Tightened underwriting criteria have led to a net decrease in total credit card accounts and balances as well as a recovery in credit performance over the last year,” according to the report.

Stricter underwriting may have contributed to a drop in the share of accounts 30, 60, or 90 days past due. A press release for the Fed report revealed that figures for past due accounts fell for the first time since the fourth quarter of 2021, on an annual basis.

While the Fed study contains a great deal of recent historical information, issuers can glean insights from the data that can help them gauge how their card portfolio is performing in comparison to broader industry trends.

The most recent report in the series includes 15 new credit card variables, including data points for total card purchase volume by consumer credit scores. The new measurements will “allow users to better understand how consumers are using and accessing credit cards and mortgages from the country’s largest banking institutions,” the release said.

Issuers can use the Fed’s interactive tools to hone in on the data points and time periods most relevant to them. And they can use that information to gain insights into their past performance and inform revenue projections.