New York Fed links the card delinquency gap to pandemic-era lending in lower-income areas

The Federal Reserve Bank of New York said on November 10 that the credit card delinquency gap between lower- and higher-income neighborhoods has widened since 2022, and that cards issued to weaker borrowers in 2020-22 show more distress, in a Liberty Street Economics analysis.

Delinquency fell for everyone in the pandemic, then the gap opened

The New York Fed's authors, who include Donghoon Lee, an economic research advisor at the bank, said credit card delinquency "rose sharply between 2022 and 2024, and the increase was steepest among borrowers in lower-income neighborhoods." Delinquency rates fell for all income groups and converged during the pandemic, when forbearances, stimulus payments and reduced consumption improved payment behavior, the analysis said.

Since 2022 the measure of new serious delinquency has worsened. Recent rates are higher than before the pandemic for every group, and the gap between higher-income and lower-income neighborhoods has expanded, the authors said. They sorted borrowers into four equal-population groups by the average income of their zip code.

Lenders opened the door wider from 2020 to 2022

The authors checked whether looser lending played a role. At the start of the pandemic the share of new cards and new credit limits going to the lowest-income quartile each rose by nearly 2 percentage points and stayed elevated until 2023, which they called consistent with lenders easing underwriting standards.

The median credit score at card issuance fell to 688 in 2020-22 from 699 in 2017-19, according to the analysis, a drop of 11 points (computed). The authors said the drop likely understates the easing, because scores across the population were rising over the same period. Cards issued since early 2023 have generally gone to borrowers with higher scores, they said.

They also stressed that conditions in the economy were "likely the main contributing factor": most households have used up pandemic-era savings, most fiscal and monetary support has ended, and high inflation and rising borrowing costs have squeezed consumers.

The 2020-22 cards drove the peak, and newer cards look stronger

Newly issued cards have historically been the most likely to fall behind, the analysis said. The 2020-22 group of cards "showed a rapid rise and high peak throughout 2023 and into 2024," making up a sizable share of new delinquencies, while the 2017-19 group peaked at a relatively low level during the pandemic.

The authors wrote that delinquency rates for cards issued during the pandemic "are abating." If current patterns hold, they said, the elevated delinquencies of recent years "may prove to be more of a pandemic-era echo than a permanent feature of the credit card market." They added that "absent macroeconomic shocks" they anticipate new card delinquencies will continue to improve.

Balances kept growing while the serious-delinquency flow edged down

The analysis accompanies the bank's Quarterly Report on Household Debt and Credit. Total household debt rose $334 billion, or 1.8%, in the third quarter of 2026 to $19.1 trillion. Credit card balances rose $22 billion to $1.29 trillion, and aggregate card limits rose $115 billion. FinanceInTime covered the wider report in an earlier analysis.

The share of card balances moving into serious delinquency, meaning 90 or more days past due, was 6.87% in the third quarter of 2026, compared with 7.05% in the third quarter of 2025, the bank's table shows. The bank said transition rates into serious delinquency "slightly improved for credit cards."

A fading echo is a forecast with a condition attached

We think the New York Fed's reading is reasonable but easy to over-read. The data point to a group of cards, not to a permanent change: the 2020-22 cards are the ones in trouble, and newer ones were issued to borrowers with higher scores, which supports a gradual improvement in delinquency. The opportunity for households is lower distress if borrowing costs and inflation ease; the threat is that lower-income households carry the most stress and have the least cushion if either turns up again.

We expect card delinquency to keep easing over the next year if unemployment stays low and inflation does not re-accelerate. Our view would change if the serious-delinquency flow rises for two quarters in a row, or if the newest cards start to fall behind faster than the authors' pattern implies.

The view in this final section is FinanceInTime's editorial opinion, for information only. It is not investment, tax, legal or other advice, and it does not take your circumstances into account. Forecasts are uncertain and past results do not guarantee future ones.