Stock Market Crash Alert: What Credit Card Delinquencies Can Tell Us About 2024

Rising credit card delinquencies and balances suggest that an economic slowdown is on the way

Source: Teerasak Ladnongkhun/

As Wall Street enjoys its fourth-straight week of stock market gains, the rising threat of credit card delinquencies continues to send signals of a potential stock market crash. What do you need to know about credit card debt lately?

Well, in the midst of what looks to be another strong month for stocks, an increasing number of credit card delinquencies may mean the party is over. 30-plus and 90-plus day delinquencies have been climbing this year, seemingly as a response to the Federal Reserve’s aggressive rate hike campaign.

In the second quarter of the year, 5.08% of credit card balances were at least 90 days past due, per the New York Fed. This is a notable increase from the 3.35% delinquency level from the same quarter in 2022. While this isn’t a historically high level, it’s a surprisingly rapid increase that could signal a further economic slowdown ahead.

“Credit card delinquency rates are back to where they were at the end of the last economic expansion, which in and of itself is not worrisome. The speed of that ascent is somewhat disturbing, however, in terms of what it says about the US economy,” notes Nicholas Colas, co-founder of DataTrek Research.

Will Rising Credit Card Delinquencies Result in a Stock Market Crash?

Total U.S. credit card debt reached $1 trillion for the first time in history in Q2, leading some economists to speculate that the seemingly resilient consumer may be propping up their spending on the back of debt. Reasonably so, the Fed-induced recession that many predicted would hit the U.S. in the second half of 2023 is, so far, no where to be found.

Now, the concern here is that higher interest rates result in steeper penalties for delinquencies — in this case, credit card interest rates have climbed more than 40% in just the past 18 months. The threat of more brutal penalties will force consumers to cut back their spending. When consumers slow down their spending, corporations feel it. As earnings inevitably deteriorate, the entire stock market may become subject to a slowdown, akin to what many economists have predicted.

“When the percentage of credit-card holders paying their outstanding balances late increases, it historically has foreshadowed an oncoming slowdown,” reports Andrew Addison, Publisher and Editor of The Institutional View. “As consumers’ balance sheets become stretched, they cut back on their spending. The cutbacks could be on discretionary items such as restaurants and travel, or essentials such as medicine or food.”

That said, stocks are in a good place currently. Since the mid-year correction, the S&P 500 and Nasdaq Composite have been enjoying a welcome second-half surge. This has been in part due to surprisingly strong macroeconomic data, like easing inflation and resilient consumer spending. It has also been due to strong earnings.

Heading to the end of 2023, while most traders will have their eyes peeled on stock charts, it’s worth keeping up with delinquencies to see the path forward for U.S. consumers. Especially with the recent return of student loan payments, household spending may be subject to a sharp reversal.

On the date of publication, Shrey Dua did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the Publishing Guidelines.

With degrees in economics and journalism, Shrey Dua leverages his ample experience in media and reporting to contribute well-informed articles covering everything from financial regulation and the electric vehicle industry to the housing market and monetary policy. Shrey’s articles have featured in the likes of Morning Brew, Real Clear Markets, the Downline Podcast, and more.

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