Fed Report Reveals That More Cardholders Only Make Minimum Payments While Some See Limits Rise

You’ve probably heard the phrase “past performance is not indicative of future results.” Investment literature often includes that line, or some version of it, to let potential investors know they shouldn’t assume what an investment asset will do based on its past record.

But looking into the past for clues that can inform predictions of future performance isn’t an exercise without merit. Credit card issuers can use data from recent history to identify trends and make educated assumptions about projected cardholder behavior. 

Based on a new report from the Federal Reserve Bank of Philadelphia, credit card issuers may reasonably conclude that many cardholders will struggle to pay their balances in full each month in 2025. The report revealed that just over 11% of cardholders paid the minimum balance on their accounts during 2024’s fourth quarter.

The percentage of accounts only paying the minimum amount due each month hit a 12-year record high since the Philadelphia Fed has issued the report and represents a 25 basis point increase over 2024 third-quarter figures. 

“Large banks mostly believe that credit card performance will remain at its current levels in 2025,” the Fed said in commentary accompanying its report. “However, the share of credit card accounts making the minimum payment has hit series highs in each of the past two quarters.

“Collectively, these trends, along with a new series high for revolving card balances, indicate great consumer stress,” the commentary continued.

The news in the Fed report wasn’t gloomy for all cardholders. Issuers increased credit lines, on average, for borrowers whose limits fall in the 90th percentile of current card limits. Those borrowers saw their credit limits rise to $19,500, an increase of $1,000 over the limit the same group of cardholders could access at the end of 2023.

Borrowers in the 50th percentile saw their year-over-year limits remain the same at $5,000 while those in the 70th percentile received a $500 limit year-over-year increase to end 2024 at $10,500. Credit card issuers can raise limits for profitable customers to encourage them to use their cards to purchase bigger ticket items.

Card balances were up overall as 2024 drew to a close. Total balances topped $950 billion at the end of the year, an increase of nearly $40 billion over 2023’s year-end figures.

And the length of time that balances have been past due also increased in 2024, per the Fed report. The fourth quarter of 2024 saw increases in the percentage of accounts that were past due by 30, 60, and 90 days when compared to the prior quarter. 

Cardholders who don’t pay their balances in full each month may be subject to interest charges that exceed 20%. The average interest rate for credit cards topped 28% a few weeks ago. 

The report from the Federal Reserve Bank of Philadelphia comes at a time when credit card interest rates are under fire in the nation’s capital. Senators and members of the House of Representatives have introduced initiatives to cap interest rates at 10%.

Politicians have joined forces to cap credit card interest rates in 2025.

“We cannot continue to allow big banks to make huge profits ripping off the American people,” Senator Bernie Sanders (I-VT) said in a press release introducing his bill to cap card interest rates. “This legislation will provide working families struggling to pay their bills with desperately needed financial relief.”

But if credit card interest rates in the upper 20s aren’t enough to dissuade cardholders from carrying balances from one month to the next, it raises questions about exactly what types of behaviors a 10% cap on interest rates would encourage. 

Reduced interest rates stand to decrease the fees cardholders accrue each month, but only if their balances remain the same. A credit card interest rate cap could motivate cardholders to spend more with their cards with no intention of paying their balances in full each month. 

If that happens, prepare for the next report from the Federal Reserve Bank of Philadelphia’s to bring more news of cardholder distress.