More Americans are falling behind on their credit card payments—thanks to an alarming surge in Gen Zers who’ve maxed out their cards.

According to the most recent data from the New York Fed, Americans collectively owed $1.12 trillion in credit card debt at the end of the first quarter.

Although debt levels declined slightly from the previous quarter, delinquency rates rose—and Gen Zers may be the biggest reason why.

Compared to a year earlier, 8.9% of total credit card balances transitioned into delinquency in the first quarter.

“[W]hat delinquency rates are showing is that there is increased stress among some segments of the population,” the New York Fed researchers wrote.

Nowhere is this stress more apparent than in Gen Zers. The data showed that 15.3% of credit card borrowers in this generation have maxed out their credit cards, which is usually a sign of future delinquency spikes.

“[L]ooking at maxed-out borrowers is useful for gaining some insight into where new delinquencies are headed,” the New York Fed’s researchers wrote.

This is particularly concerning, as Gen Zers and younger Americans in general have less credit and income history than their older counterparts.

Failing to make credit card payments on time could affect their credit scores, making it harder to get approved for mortgages and auto loans.

There are many reasons why Americans increasingly miss their credit card payments, ranging from record costs of living to growing financing costs.

Credit card interest rates creep higher

According to a Creditnews analysis, credit card APRs are at their highest level ever, and that's largely due to the record profit margins of credit card issuers.

Borrowers are now paying an average APR of 21.59% on their credit cards, which is a far cry from just over 15% borrowers paid before the pandemic.

Although credit card APRs are influenced by the Fed, which has been hiking interest rates since 2022 to combat inflation, card issuers aren't selling themselves short either.

As Creditnews reported, credit card profit margins account for roughly half of the credit card APR increase over the past decade.

“By some measures, credit cards have never been this expensive,” said Dan Martinez, a senior credit card program manager at the Consumer Financial Protection Bureau (CFPB).

“Higher APR margins have allowed credit card companies to generate returns that are significantly higher than other bank activities,” he explained.

That’s bad news for Americans, who carry an average credit card balance of $6,360. At current APR rates, it would take 18 years for them to pay off their balances if they just made the minimum payment.

The CFPB warns that this “additional interest rate burden may push consumers into persistent debt, accruing more in interest and fees than they pay towards the principal each year.”

It’s estimated that roughly 10% of U.S. credit card accounts were in “persistent debt” last year.

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