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Repair Windows errors before they cause bigger problemsFix Now →Fix the driver behind crashes, sound loss and screen glitchesFind Drivers →Clear out junk files and repair common Windows errorsFree Scan →“Credit card default rate” is not one universal statistic. It can mean an account-level default definition used in a Federal Reserve stress-test model, a bank portfolio’s annualized net charge-off rate, or a delinquency rate. Each uses a different numerator, denominator, population and time threshold.
To interpret a figure correctly, identify who published it, whether it measures accounts or dollars, the delinquency or default threshold, how the denominator is constructed, and whether the result is annualized or seasonally adjusted. The sections below show the main U.S. measures and the calculations behind them.
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Start with the measure, not the percentage
A percentage without a definition can be misleading. A Federal Reserve supervisory model may label an individual credit-card account “in default” after a specified event. A commercial bank’s reported charge-off rate measures loss dollars flowing through a portfolio during a quarter. A delinquency rate measures balances that are past due, even when they have not been charged off.
| Measure | What the numerator represents | Denominator and unit | Key threshold or timing |
|---|---|---|---|
| Federal Reserve supervisory default | Accounts meeting the model’s default status | Account-level model population | At least 120 days past due, bankruptcy, or charge-off |
| Commercial-bank net charge-off rate | Gross charge-offs minus recoveries during the quarter | Average loan dollars outstanding; portfolio balance measure | Quarterly flow, normally annualized |
| Delinquency rate | Delinquent loan dollars | Total loan dollars outstanding in the category | Threshold depends on the series; one Federal Reserve sample uses at least 30 days past due |
| CFPB cohort charge-off ratio | Unique balances delinquent during a quarter and charged off at quarter end | Unique accounts or balances delinquent at any point in that quarter | Counts a balance once, when it first became delinquent in the quarter |
These measures can move in different directions. Delinquencies may rise before charge-offs appear, while recoveries can reduce a net charge-off rate even when gross losses remain high. A bank can also report a high dollar charge-off rate while the percentage of accounts affected is lower if larger balances are concentrated among borrowers who default.
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What “default” means in the Federal Reserve stress-test model
For its 2023 supervisory stress-test methodology, the Federal Reserve states: “The Federal Reserve defines credit card accounts as in default when they are 120 days or more past due, in bankruptcy, or charged off.” This is an institutional definition for a supervisory model, not a rule that every card issuer must use the same public default-rate formula.
The model estimates an account’s probability of transitioning to default using account characteristics, borrower characteristics and macroeconomic conditions. Inputs described by the Federal Reserve include credit score, cycle-ending balance, payment status, card type and unemployment assumptions. Separate models are used for combinations of current or inactive status, delinquency status, lending type and forecast horizon.
Because the model is account based, its output is conceptually different from a portfolio loss ratio. A model can estimate the probability that a particular account will enter the defined default state; it does not simply divide all charge-off dollars by all balances. A news article that calls this probability a “bank’s default rate” should identify the model and its population.
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How commercial banks calculate a net charge-off rate
The Federal Reserve’s commercial-bank methodology defines a category’s quarterly charge-off rate as the flow of net charge-offs during the quarter divided by the average level of loans outstanding during that quarter. Net charge-offs are gross charge-offs minus recoveries. The published quarterly ratio is multiplied by 400 to express an annual percentage rate.
The formula is:
Annualized quarterly net charge-off rate = (quarterly gross charge-offs − quarterly recoveries) ÷ average loans outstanding during the quarter × 400.
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The Federal Reserve says charge-off amounts come from Call Report schedule RI-B and average loan balances from schedule RC-K. The calculation uses a balance denominator, so it is not the percentage of cardholders or the percentage of accounts that defaulted.
Worked example
Assume a bank reports $120 million of gross credit-card charge-offs and $20 million of recoveries in one quarter. Its average credit-card loans outstanding were $10 billion.
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- Calculate net charge-offs: $120 million − $20 million = $100 million.
- Divide by average loans: $100 million ÷ $10 billion = 0.01, or 1% for the quarter.
- Annualize the quarterly ratio: 1% × 4 = 4%.
The resulting 4% is an annualized net charge-off rate based on that quarter’s flow and average balance. It does not say that 4% of the bank’s accounts will default over the next year, and it does not identify which customers will suffer a loss.
Why the factor is 400
The underlying ratio is a decimal quarterly rate. Multiplying by four annualizes four comparable quarters; multiplying by 100 converts the decimal to a percentage. Combining those operations gives a factor of 400. A seasonally adjusted series may apply seasonal treatment before or alongside the published annualized presentation, so the series description should be read with the number.
How a delinquency rate differs from default and charge-off
The Federal Reserve methodology describes a delinquency rate as delinquent loan dollars divided by total loans outstanding in the relevant category. It is therefore a balance-weighted measure, not necessarily the share of accounts that are delinquent.
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Thresholds vary. In one Federal Reserve research dataset built with New York Fed and Equifax data, the measure is the fraction of sampled card balances at least 30 days past due in a quarter. Severely derogatory balances paired with a charge-off are excluded. The dataset is an anonymized 5% random sample of consumers with a U.S. credit file.
That construction differs from a bank call-report ratio. It uses sampled consumer balances rather than every loan dollar held by commercial banks, and its 30-day threshold is earlier than the 120-day default condition in the supervisory model. A 30-day delinquency percentage should never be labeled a 120-day default rate without explaining the change in definition.
When an account is charged off
Charge-off timing is a regulatory and accounting issue, separate from the supervisory model’s default label. Federal Reserve supervisory guidance generally calls for open-end retail loans to be classified as loss and charged off at 180 cumulative days past due from the contractual due date. The guidance also says an institution should record an actual credit loss when it becomes aware of the loss, and no later than the applicable policy time frame.
| Event or series | What it means | What it does not mean |
|---|---|---|
| At least 30 days past due in the cited research sample | An early delinquency observation on sampled card balances | It is not a supervisory default determination |
| 120 days past due, bankruptcy or charge-off in the Fed model | The account meets that model’s default status | It is not a universal charge-off date for every issuer |
| 180 cumulative days past due under cited open-end guidance | The loan is generally classified as loss and charged off under the policy | It is not the same statistic as a modeled probability of default |
A charge-off is the bank’s recognition that a loan is a loss for accounting and supervisory purposes. It does not, by itself, establish that a borrower’s legal obligation has disappeared; the effect on liability depends on applicable law, contracts and collection activity.
Why the CFPB’s cohort charge-off measure is different
The Consumer Financial Protection Bureau’s 2023 report illustrates another legitimate construction. It identifies unique balances that were delinquent at any point during a quarter and charged off at quarter end, then divides by the unique accounts or balances that were delinquent at any point in that quarter. A balance is counted once, when it first became delinquent during the quarter.
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This is a cohort ratio. Its denominator is a group that experienced delinquency during the quarter, not the bank’s average outstanding card balance. Its numerator is also not net charge-off dollars: recoveries are not subtracted in the way they are in the Federal Reserve’s aggregate net charge-off formula.
The CFPB report discusses re-aging and loss-mitigation practices. Re-aging means returning a delinquent open-end account to current without collecting all principal, interest and fees that were due. Such practices can change how a delinquency cohort evolves, and issuers may not apply them identically.
Independent reader supportYour contribution helps us test, update, and keep practical guides available for everyone.The latest Federal Reserve portfolio figure and how to read it
The FRED page for the Board of Governors’ “Charge-Off Rate on Credit Card Loans, All Commercial Banks” series displayed a 3.82% seasonally adjusted, annualized net charge-off rate for 2026 Q2, with the page updated August 25, 2026. The same page displayed 4.19% for 2025 Q2, 4.18% for 2025 Q3 and 4.09% for 2025 Q4.
| Observation | Value | Interpretation |
|---|---|---|
| 2026 Q2 | 3.82% | Seasonally adjusted, annualized net charge-off rate for all commercial banks |
| 2025 Q2 | 4.19% | Same aggregate series and treatment |
| 2025 Q3 | 4.18% | Same aggregate series and treatment |
| 2025 Q4 | 4.09% | Same aggregate series and treatment |
The 3.82% figure is a portfolio loss statistic. It is not the probability that a particular cardholder will default, the share of accounts currently delinquent, or the percentage of consumers whose cards were charged off. Because the series is updated quarterly, check the latest observation whenever the number is used for a current comparison.
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Repair common Windows errors and clear accumulated junk for a smoother, more stable PC - no reinstall needed.Free scan · no reinstallA separate Federal Reserve delinquency study covering 2000 Q1 through 2024 Q3 reported a table mean delinquency rate of 4.21% across 80 quarterly observations. That mean belongs to the study’s specified sample and methodology; it is not a replacement for the latest commercial-bank charge-off observation.
Why two “default rates” can disagree
Differences are expected when publishers measure different outcomes or populations. Before comparing two figures, record each of the following:
- Outcome: modeled default status, delinquency, gross charge-off or net charge-off.
- Threshold: the number of days past due or other event that qualifies an account.
- Unit: accounts, balances or dollar flows.
- Population: sampled consumers, a particular issuer cohort, or all commercial-bank portfolios.
- Numerator: whether recoveries are subtracted and whether balances are counted once or repeatedly.
- Denominator: average loans, quarter-end balances, total loans or only loans that became delinquent.
- Time treatment: quarterly versus annual data, annualization, seasonal adjustment and the release or update date.
For example, a 30-day delinquency series can rise before a 180-day charge-off series because the same account has not yet reached the later loss-recognition stage. A net charge-off rate can also be lower than a gross charge-off rate because recoveries offset previously charged-off balances.
How banks use these measures
Monitoring current portfolio performance
Delinquency rates provide an earlier signal of payment stress. Banks can monitor balances that are 30, 60 or 90 days past due and evaluate whether the pattern is broad or concentrated in a product, risk tier or borrower segment.
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Charge-off rates capture losses that have reached the institution’s accounting and supervisory recognition process. Netting recoveries makes the aggregate rate closer to the portfolio’s realized loss flow, while the average-balance denominator relates that flow to the amount lent.
Forecasting under economic scenarios
Supervisory stress-test models use borrower and account variables together with macroeconomic assumptions such as unemployment. The resulting transition probabilities help estimate how losses could evolve under a forecast; they are not a promise about an individual account.
A practical method for reading a news report or bank filing
- Write down the publisher and exact series or report title.
- Identify whether the outcome is default, delinquency, gross charge-off or net charge-off.
- Check whether the unit is accounts, sampled balances or portfolio dollars.
- Find the threshold: days past due, bankruptcy, charge-off or another event.
- Read the denominator and formula. Look for average balances, total balances or a delinquent-only cohort.
- Check whether the figure is annualized, seasonally adjusted and quarterly.
- Note the population and geography. The measures described here are U.S.-focused.
- Compare only figures with compatible definitions, or state the differences explicitly.
Common interpretation errors
- Calling the Federal Reserve’s net charge-off rate “the percentage of cardholders who defaulted.” It is based on net charge-off dollars and average loan balances.
- Presenting 120 days as the universal charge-off point. It is the threshold in the cited supervisory model; the cited open-end policy generally uses 180 cumulative days for classification and charge-off.
- Equating a 30-day delinquency measure with a 90-day or 120-day default measure.
- Using the CFPB cohort ratio as though it were the Federal Reserve’s aggregate net charge-off series.
- Treating an aggregate quarterly rate as a personal prediction or credit-score calculation.
Bottom line
“Credit card default rate” is meaningful only after its definition is attached. The Federal Reserve supervisory model uses an account-level default state of 120 or more days past due, bankruptcy or charge-off. The Federal Reserve’s commercial-bank series instead annualizes net charge-off dollars against average loan balances. Delinquency and CFPB cohort measures use still different thresholds and denominators. When you identify the source, population, unit, threshold, formula and time treatment, apparently conflicting percentages become comparable—or you can see why they should not be compared at all.
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