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“Credit card default rate” is not one universal statistic. It can mean a Federal Reserve model’s account-level default status, a bank portfolio’s net charge-off rate, or a delinquency rate. Those measures use different definitions, units and denominators, so a percentage is meaningful only when you identify who published it, what event it counts and how the rate was calculated.
This guide explains each measure, shows the Federal Reserve’s formulas, distinguishes modeled default from regulatory charge-off timing, and gives you a method for comparing figures in bank reports and news coverage.
Start with the measure, not the percentage
Before interpreting any reported rate, identify six attributes:
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- Outcome: modeled default, delinquency, gross charge-off or net charge-off.
- Threshold: such as 30, 120 or 180 days past due, bankruptcy or another event.
- Unit: accounts, sampled consumers or dollar balances.
- Population: a commercial-bank portfolio, a card issuer’s cohort, or a research sample.
- Formula: the numerator and denominator, including whether recoveries are subtracted.
- Time treatment: quarter, annualization, seasonal adjustment and release date.
Two percentages can both be accurate while answering different questions. A balance-weighted charge-off rate is not the percentage of cardholders who defaulted, and a 30-day delinquency rate is not a 120-day default rate.
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What “default” means in the Federal Reserve’s supervisory model
In its June 2023 Descriptions of Supervisory Models, 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.” That definition applies to the supervisory stress-testing model; it is not a claim that every card issuer uses one identical public formula.
The model estimates an account’s probability of transitioning to that default state from account characteristics, borrower characteristics and macroeconomic conditions. Described inputs include credit score, cycle-ending balance, payment status, card type and unemployment assumptions. Separate model structures are used for current or active accounts, current or inactive accounts, delinquent accounts, lending type and forecast horizon.
Because this is an account-level modeling definition, a modeled default probability should not be compared directly with a commercial-bank net charge-off percentage unless the source explains how the populations and units were reconciled.
How the Federal Reserve calculates a commercial-bank net charge-off rate
The Federal Reserve’s commercial-bank methodology defines a quarterly charge-off rate as the flow of net charge-offs during the quarter divided by the average 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 calculation 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 Board’s methodology says charge-off amounts are reported on Call Report schedule RI-B and average loan balances on schedule RC-K. The multiplication by 400 annualizes a quarterly rate (four quarters per year, with percentages expressed on a 100-point scale).
Worked example
Assume a bank reports $12 million in gross credit-card charge-offs, $2 million in recoveries and an average card-loan balance of $500 million for a quarter. Net charge-offs are $10 million. The quarterly ratio is 10 ÷ 500 = 0.02, or 2 percent. Annualizing it gives 2% × 4 = 8 percent, equivalently 10 ÷ 500 × 400.
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Delinquency rate: an earlier and different signal
The Federal Reserve methodology defines a delinquency rate for a loan category as delinquent loan dollars divided by total loans outstanding in that category. It is therefore a balance-weighted measure, not necessarily the percentage of accounts that are delinquent.
Thresholds vary by source. Federal Reserve researchers using New York Fed/Equifax data, for example, measure 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 from that measure. The dataset is an anonymized 5 percent random sample of consumers with a U.S. credit file.
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A 30-day delinquency statistic can rise before charge-offs do, because an account may become current again, enter a workout program or remain delinquent for months before a loss is recognized. It should never be labeled a 90-day, 120-day or 180-day default rate without evidence that the source uses that threshold.
Default, delinquency and charge-off side by side
| Measure | Typical event or threshold in the cited source | Numerator and denominator | What it answers |
|---|---|---|---|
| Federal Reserve supervisory default | Account is at least 120 days past due, in bankruptcy or charged off | Account transitions modeled from borrower, account and economic variables | How likely an account is to enter the model’s default state |
| Commercial-bank net charge-off rate | Losses recognized during a quarter | Gross charge-offs minus recoveries, divided by average loans; quarterly ratio annualized ×400 | How much of a bank portfolio was charged off, net of recoveries, at an annualized pace |
| Delinquency rate | Threshold set by the publisher; one cited research series uses at least 30 days past due | Delinquent dollars divided by total dollars, or a sampled balance fraction | How much of the portfolio is currently past due under that threshold |
| Open-end retail charge-off policy | Generally 180 cumulative days past due under cited Federal Reserve guidance | Institution classifies the account as loss and charges it off under policy | When a lender must generally recognize a loss for regulatory purposes |
Why 120 days and 180 days are both mentioned
The 120-day threshold belongs to the Federal Reserve’s supervisory model definition. Federal Reserve supervisory policy for open-end retail loans generally calls for an account that reaches 180 cumulative days past due from the contractual due date to be classified as loss and charged off.
These are different purposes. A stress-test model needs a consistent default event for forecasting. Accounting and supervisory guidance governs when an institution recognizes a loss. The guidance also says actual credit losses should be recorded when the institution becomes aware of the loss, and no later than the stated policy time frames. Consequently, 120 days is not a universal legal or operational point at which every issuer charges off every account.
A charge-off is the bank’s accounting and supervisory recognition that a loan is a loss. The sources discussed here do not establish all consequences for a consumer’s legal obligation, so a charge-off percentage should not be interpreted as proof that a borrower’s debt has been legally canceled.
Why the CFPB’s cohort charge-off measure is different
The Consumer Financial Protection Bureau’s 2023 report illustrates another construction. Its cohort measure counts unique balances that were delinquent at any point during a quarter and charged off at quarter end. The denominator is the unique accounts or balances that were delinquent at any point in that quarter. A balance is counted once, when it first became delinquent in the quarter.
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That is not the Federal Reserve aggregate series, whose denominator is average commercial-bank loan balances and whose numerator is net charge-offs after recoveries. A cohort ratio follows a defined group of delinquent accounts; a portfolio net charge-off rate measures loss dollars flowing through a bank’s entire balance base.
The CFPB report also discusses re-aging and loss mitigation. Re-aging means returning a delinquent open-end account to current without collecting all principal, interest and fees due. Such practices can change how a delinquency series develops, and issuer practices are not necessarily identical.
Independent reader supportYour contribution helps us test, update, and keep practical guides available for everyone.A current Federal Reserve number—and what it does not mean
The FRED page for the Board of Governors’ series “Charge-Off Rate on Credit Card Loans, All Commercial Banks” displayed 3.82 percent for 2026 Q2. The observation is seasonally adjusted, quarterly, annualized and net of recoveries; the page was updated August 25, 2026. The same series displayed 4.19 percent for 2025 Q2, 4.18 percent for 2025 Q3 and 4.09 percent for 2025 Q4.
These are aggregate commercial-bank portfolio statistics. The 3.82 percent figure is not the probability that a particular cardholder will default, the share of accounts currently delinquent or an individual credit-score prediction. Because the series updates each quarter, check the series page for a newer observation before publishing or relying on the number.
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For additional context, a 2025 Federal Reserve delinquency study covering 2000 Q1 through 2024 Q3 reported a table mean delinquency rate of 4.21 percent across 80 quarterly observations. That mean belongs to the study’s specified sample and methodology; it is not the latest charge-off rate and should not be substituted for the current aggregate series.
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How to compare two reported rates correctly
Use this checklist before concluding that one bank, year or country has a higher default rate than another:
- Name the publisher and series. A Board of Governors series, a supervisory model, a CFPB cohort report and an issuer’s investor presentation may use different constructions.
- Identify the outcome. Confirm whether the figure is delinquency, modeled default, gross charge-off or net charge-off.
- Write down the threshold. Record 30, 90, 120 or 180 days past due, bankruptcy, charge-off or any other trigger.
- Check the unit and population. Determine whether the rate uses accounts, balances, sampled consumers, card loans only or all loans in a category.
- Reproduce the formula. Look for average balances versus quarter-end balances, delinquent balances versus total balances, and gross versus net treatment.
- Check time adjustments. Note the quarter, whether the rate is annualized, whether it is seasonally adjusted and the data-release or update date.
- Read footnotes for re-aging and exclusions. Workout programs, recoveries, bankruptcy treatment and excluded severely derogatory balances can materially change the result.
Common interpretation mistakes
- Calling a net charge-off rate the percentage of cardholders who defaulted. The Federal Reserve rate is based on dollars and average balances, not a count of people.
- Treating 120 days as the universal charge-off date. It is the supervisory model’s default definition; cited open-end charge-off guidance generally uses 180 cumulative days, subject to earlier recognition when a loss is known.
- Mixing delinquency thresholds. A 30-day sampled-balance rate cannot be compared as though it were a 90-day or 120-day default rate.
- Putting a cohort ratio beside an aggregate net-charge-off ratio without explanation. Their denominators, populations and treatment of recoveries differ.
- Reading an annualized quarterly rate as a guaranteed 12-month outcome. Multiplying by 400 expresses the quarter’s pace at an annual rate; it is not a promise that the same loss volume will occur over the next four quarters.
- Using an old observation as current. Quarterly series are revised or extended as new data arrive, so the observation date and update date belong with the number.
A practical reading template
When a report says “credit card defaults rose to 4 percent,” rewrite it in a precise form before drawing a conclusion: “According to [named publisher], [population] recorded a [modeled default/delinquency/gross or net charge-off] rate of [percentage] in [period], measured on [accounts or balances], using a [threshold] definition and [formula], with [seasonal adjustment and annualization].”
If the report cannot supply those details, treat the percentage as incomplete rather than assuming the most familiar definition. A precise label often resolves an apparent contradiction between two reputable sources.
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Credit card default rates are context-dependent risk measures. The Federal Reserve’s supervisory model calls an account defaulted at 120 or more days past due, in bankruptcy or when charged off; its commercial-bank series calculates an annualized quarterly net charge-off rate from charge-offs, recoveries and average balances; and delinquency measures track past-due balances under a stated threshold. Regulatory charge-off guidance generally points to 180 cumulative days for open-end retail loans, while actual losses may be recognized earlier when known. Always attach the source, population, unit, threshold, formula and time adjustment to the percentage before comparing it or applying it to an individual borrower.
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