Macro Featured

The American Consumer Is Fine. Millions of Americans Are Not.

Credit card delinquencies look like 2008 — until the NY Fed shows why the chart is misleading. What the data really says about America's bifurcating consumer economy, and how to position for it.

Alpha One

03 Sep 2026 • 6 min read

The scariest chart in American consumer finance shows credit card delinquencies at levels last seen during the Great Recession. Between late 2022 and early 2026, the share of credit card balances 90 or more days past due on credit reports climbed from 7.6 percent to 12.8 percent. If you have seen a viral post declaring that Americans are drowning in debt, this is the number behind it.

Here is the problem: the Federal Reserve Bank of New York just took that chart apart — and found that much of the increase is a measurement artifact, not a wave of new distress. At the same time, the deeper story the doom posts are gesturing at is real. The American consumer, in aggregate, is fine. Millions of individual Americans are not. Understanding the difference between those two statements is worth more to an investor right now than almost any single data point.

The chart that launched a thousand doom posts

The 12.8 percent figure is what economists call a stock delinquency rate: it counts every dollar of credit card debt on credit reports that is 90 or more days past due, no matter how old the delinquency is. That includes debt that lenders charged off years ago — written off their books as a loss — but continue to report to the credit bureaus because the borrower still legally owes it.

In August, researchers at the New York Fed published an analysis reconciling this number with two other measures that tell a very different story. The flow rate — the share of balances newly going delinquent each quarter, which captures what is happening to borrowers right now — has been essentially flat for almost two years. Bank call report data, which tracks past-due loans actually sitting on lenders' books, shows the same stability.

So why is the stock measure screaming while the flow measure shrugs? Reporting behavior changed. Between 2004 and 2012, only about 40 percent of charged-off credit card debts were still being reported to credit bureaus a year after charge-off. By 2024, that figure had doubled to 80 percent. Old bad debt now lingers on credit reports far longer than it used to, mechanically inflating the stock delinquency rate even when no additional borrowers are falling behind. Strip out charged-off balances, and all three measures line up — and have been stable since 2024.

That is genuinely good news for anyone pricing recession risk off that chart. But do not close the tab yet, because the artifact contains its own signal: more than 23 million Americans are carrying charged-off credit card debt on their credit reports. Their delinquency is not "new," but it is not resolved either. It sits there, suppressing credit scores, blocking access to mortgages and auto loans, and feeding a collections industry that is having a very good decade.

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The K-shape fight

The second half of the consumer story is the "K-shaped economy" — the claim that high earners are pulling away while everyone else stalls. The strongest version comes from Moody's Analytics: spending by the top 10 percent of earners grew 62 percent between the third quarter of 2020 and the third quarter of 2025, far outpacing every other group, and the top 10 percent now account for roughly 46 percent of all US consumer spending. Moody's chief economist Mark Zandi puts the top 20 percent — households earning above roughly $175,000 — at nearly 60 percent of outlays, and calls the K-shape "firmly intact."

But here, too, the data is messier than the narrative. The Federal Reserve Bank of Minneapolis reviewed the competing sources this year and found they do not agree. New York Fed data shows nominal spending growth since 2020 ranging from 29 percent for low-income households to 36 percent for high-income ones — a gap, but nothing like Moody's 62 percent. The Consumer Expenditure Survey shows the lowest-income quintile increasing spending nearly 4 percent in 2024, more than any other group, while the top 10 percent spent slightly less than the year before. Bank of America's card data splits the difference, describing the shape as "more E than K" — three tiers, not two.

The honest read: the direction is real, the magnitude is contested. High earners — bolstered by equity portfolios near highs and locked-in low mortgage rates — are doing the heavy lifting in aggregate spending. Lower-income households are not collapsing, but they are absorbing prices roughly 25 percent above 2020 levels with far thinner buffers, and surveys consistently show a majority of card-carrying households revolving balances to cover essentials.

What the actual balance sheet says

The New York Fed's most recent Quarterly Report on Household Debt and Credit, released August 11, shows total household debt at $18.8 trillion — down $13 billion in the second quarter, the first decline in years. About 4.7 percent of outstanding debt is in some stage of delinquency, and that aggregate rate improved slightly quarter over quarter. Transitions into early delinquency ticked up modestly for auto loans and mortgages while holding steady for credit cards.

Elevated, but stable. Not 2008. Not even 2019-with-a-fever. A household sector that, in aggregate, deleveraged slightly while the labor market cooled is not the setup for a consumer-led crash — it is the setup for a long grind in which the averages keep looking fine while the tails get worse.

Why this matters for your money

Three implications fall out of this.

First, stop trading "the consumer." There is no such person. Aggregate consumption is increasingly a bet on the top two deciles — on asset prices, effectively — while the median household's stress shows up not in national spending data but in trade-down behavior, delinquency transitions, and category mix. This is why luxury, travel, and full-price retail can print solid quarters in the same tape where dollar stores, subprime auto lenders, and buy-now-pay-later books flash warnings. Both are telling the truth about different customers.

Second, watch flows, not stocks. The single most useful consumer indicator right now is the transition rate into early delinquency in the New York Fed's quarterly report — the flow measure. It is stable. The day it inflects upward across income tiers is the day the doom chart stops being an artifact and starts being a forecast. Until then, headlines built on the 12.8 percent stock figure are recycling old losses as new news.

Third, the 23 million matter — politically and commercially. Tens of millions of Americans locked out of credit by lingering charge-offs are a constituency for debt-relief politics, a revenue pool for collections and credit-repair businesses, and a structural drag on household formation at the bottom of the housing ladder. That overhang does not show up in GDP. It shows up in elections, in subprime origination standards, and in why the economy can keep growing while polling on it stays miserable.

The consumer economy is not breaking. It is bifurcating — and the data sources themselves are now split along the same line, which is why smart people armed with real charts keep arriving at opposite conclusions. When the aggregate and the median tell different stories, position for both.

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