The latest insights suggest the economic roller coaster may be leveling out, signaling a potential shift in how organizations approach debt management. A moderation in serious delinquencies across lending categories reflects a stabilizing economy, and consumers are finding more room in their budgets to stay current on payments, with economic conditions expected to gradually improve in 2025, according to a forecast released yesterday by TransUnion.
Key takeaways
- Slower credit card balance growth: After double-digit growth in 2022 and 2023, credit card balances are projected to increase more moderately, rising 3.9% year-over-year (YoY) in 2024 and 4.4% in 2025, reaching $1.136 trillion. This deceleration reflects a return to pre-pandemic growth patterns, influenced by slowing inflation and reduced consumer savings.
- Mixed trends in delinquency rates:
- Credit cards: Serious delinquencies (90+ days past due) will grow modestly, increasing by 12 basis points (bps) in 2025 compared to 78 bps in 2022.
- Auto loans: Delinquencies (60+ days past due) are expected to stabilize in late 2024 and decline slightly in 2025 to 1.38%.
- Unsecured personal loans: Delinquencies will edge up 13 bps in 2025 as lenders cautiously expand their risk appetite.
- Mortgages: Delinquencies will remain low, ticking down to 1.25% in 2025.
- Shifts in consumer credit behavior: The pandemic fostered “credit score grade inflation,” but with stimulus effects fading, a “barbell effect” is emerging. Super-prime borrowers dominate, while near-prime and subprime segments grow as credit newcomers join the market.
What they said: “We’ve observed widespread growth in credit cards in recent years for myriad reasons,” said Paul Siegfried, senior vice president and card and banking business lead at TransUnion. “Notably, credit card issuers felt comfortable taking on more risk, while consumer appetite for credit rose in tandem with higher costs for everyday goods and services. As inflation pressures dissipate and interest rates continue their slow decline, we believe there will also be a slowing in both credit card balance growth and serious delinquency rates.”
Between the lines: The stabilization in delinquency rates reflects improved household budgets, with 63% of consumers reporting finances as “as planned or better” in late 2024. However, rising balances among riskier borrowers and a record 750-basis-point gap between credit card and personal loan rates highlight ongoing challenges for lenders.
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