Credit Card Balances Drop on Annual Basis for First Time Since ’21

Credit card performance improved for the first time in over four years despite credit card interest rates being “historically high” during the first quarter, the Federal Reserve Bank of Philadelphia said Tuesday (July 8).

The cards’ average purchase APR is 24.62%, up from an average of 20.14% during the pandemic, the Philadelphia Fed said in a Tuesday press release.

The rate growth has been driven by both an elevated prime rate and the interest rate margin, which “continues to climb and is at a series high,” the Philadelphia Fed said in a Q1 2025 Insights Report released Tuesday.

“Consequently, for borrowers who carry credit card debt, interest costs are considerably greater than a few years ago,” the report said.

This data was published in the Q1 2025 release of the Philadelphia Fed’s Large Bank Credit Card and Mortgage Data series, which is the first to include 67 new measurements, such as 15 credit card variables and 52 first-lien mortgage variables, according to the press release.

Among the new variables are interest rate data for both credit cards and mortgages, total credit card purchase volume by credit score, the share of adjustable-rate and fixed-rate mortgage balances and originations, types of properties consumers are mortgaging and delinquency rates on those properties, per the release.

These newly added variables provide deeper insights into mortgages and credit cards and how consumers are using them, the release said.

The latest quarterly report found that credit card performance improved. The share of card balances and accounts 30, 60 and 90 days past due declining on an annual basis for the first time since the fourth quarter of 2021, and the share of credit card accounts making just the minimum payment fell 59 basis points, according to the release.

“Tightened underwriting criteria have led to a net decrease in total credit card accounts and balances as well as a recovery in credit performance over the last year,” the Insights Report said.

The report also found that conventional adjustable-rate mortgages (ARMs) accounted for over 25% of large bank first mortgage originations in the first quarter, up from 7.8% in the first quarter of 2021, per the release.

“Adjustable-rate mortgages (ARMs) have gained popularity as homebuyers have searched for cost relief,” the Insights Report said.

The PYMNTS Intelligence and i2c collaboration “The Credit Economy: Top-of-Wallet Credit Cards” found that nearly eight in 10 consumers with credit cards have multiple cards.

These consumers concentrate their spending on one primary card rather than spreading it out more evenly, especially for their routine purchases, according to the report.