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Credit card delinquencies are expected to spike to their highest level in a decade—but Americans are opening more credit cards than ever

December 14, 2022, 12:00 PM UTC
Photo illustration of a young man sitting at a laptop in an office.
New data forecasts show credit card delinquency rates rising to levels not seen since 2010.
Photo illustration by Fortune; Original photo by Getty Images

With inflation at record levels, a potential recession looming, and the employment market tightening, 2023 is poised to be a bumpy ride for consumers. A new report from TransUnion underscores this point—projecting that credit card delinquencies will reach serious levels in the coming year, potentially rising to rates not seen since 2010.

At the same time, new credit cards will be opened at a much higher rate than at any time in the past decade in 2023. And this, too, may be linked to a potentially challenging year ahead.

Credit card delinquencies forecasted for 2023

TransUnion’s just-released 2023 forecast, based on its latest Consumer Pulse Study, projects that credit card delinquencies in the coming year will rise from 2.10% to 2.60%. Should that projection become a reality, it would represent a 20.3% year-over-year increase in delinquent accounts, according to the report.

What’s more, credit cards aren’t the only area of borrowing in which consumers are likely to fall behind. The TransUnion report also reveals that personal loans may face challenges in 2023, with delinquencies expected to increase from 4.10% to 4.3%.

Some factors driving this concerning trend include inflation and continued layoffs across the country. And there’s one additional challenge: Many Americans are coming to terms with the end of pandemic-era stimulus funding, which had buoyed many household budgets.

“The higher delinquency rates will be due to some tightening of the employment market, but I also believe there was a lot of money put into the system and into consumers’ hands during the pandemic, and as that runs out and is depleted—and then with inflation where everything is costing more—it all starts to show up in delinquencies,” said Michele Raneri, vice president and head of U.S. research and consulting at TransUnion. “You get used to having that extra money, and when it’s not there, it’s hard to get used to.”

In light of the current economic conditions, it should be no surprise that credit card balances are also expected to grow next year. The TransUnion data on this front shows that balances will likely tick upward about 1.8% year over year to reach about $934.5 billion by the end of 2023.

Credit cards being opened at record levels 

While many credit card issuers are likely to tighten their lending standards in 2023 amid concerns about a recession, a steady stream of Americans will continue to seek new accounts.

The TransUnion report shows that originations for next year will remain above pre-pandemic levels. In fact, the forecast projects that the number of new cards opened will remain much higher than it has been in years.

“More consumers will gain access to credit cards in 2023 than in any other year in the last decade. In fact, TransUnion expects 14 million more credit cards to be issued in 2023 than in 2019, a strong year for the consumer credit market,” said Paul Siegfried, senior vice president and credit card business leader at TransUnion.

About one in four Americans (26%) surveyed in the TransUnion Consumer Pulse study reported plans to seek new credit or refinance in the next year. Of those, 53% plan to apply for a credit card, more than double all other credit types.

Like the projected credit card delinquencies, the continued interest in opening new accounts is likely linked to the many economic pressures Americans are facing and will continue to face. Many are turning to credit cards for everyday expenses to help make ends meet amid prolonged inflation and increased unemployment.

“People who answered yes that they were going to get a new credit card in the next 12 months indicated it could help with cash liquidity or cash shortfalls and that they may need something to help them bridge the gap next year as inflation and interest continue to be high,” said Raneri. 

Despite the grim forecast, Americans are optimistic

Remarkably, despite a challenging macroeconomic environment marked by account delinquencies and a reliance on credit cards to make ends meet, TransUnion’s study found that more than half (52%) of Americans are optimistic about their financial future during the next 12 months.

In particular, the youngest generations—millennials (64%) and Gen Z (61%)—are the most optimistic, TransUnion found. Experts say this is because younger generations are new entrants to the job market and experiencing upward economic mobility.

“Of the people who are optimistic, millennials and Gen Z are the most optimistic because they are often new to the workforce and still getting increases in their pay or promotions, and so their wages are coming up at greater pace than those who may be more established in the workforce,” explained Raneri.

4 tips if you’re facing credit card delinquency

If your credit card balances are ballooning, there are several ways to help regain control of your financial picture.

  • Establish an emergency fund: An emergency fund is an important financial tool. Having this type of account in place can help you avoid reaching for your credit card when unexpected expenses arise. It’s important to develop a disciplined savings habit and regularly set aside money in an account that can be tapped when the need arises. Even small contributions that are made consistently can help.
  • Transfer debt to a 0% credit card: With credit card interest rates soaring over the past year, making minimum payments on your debt will not allow you to make much progress. If your credit card balances are ballooning, consider a balance transfer and rolling your debt onto a credit card that offers 0% interest for 12, 18, or even 21 months. There are many credit card issuers offering these types of terms, and having a year or more without interest can help you get ahead on debt payments.
  • Side hustle: Establishing another stream of income and using that money to chip away at your debt or, at the very least, stay current with payments is another useful step. 
  • Reexamine your budget: Conducting an annual budget audit is always a good idea and this is even more true if you need to free up some cash to pay down debt. During the course of the pandemic, many of us signed up for subscriptions we may no longer need or became reliant on delivery services or other conveniences. Review your bank account and spending line by line and find areas you can trim so that money can be used for credit card debt.  

“With the holiday season right now, this might be a perfect time to bring consumers’ awareness to all of this—as they are out holiday shopping right now,” said Raneri. “They should be thinking about their budgets and how much they can afford to spend in a normal month and how much they can really afford to spend above and beyond that.”

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