Americans are spending more on credit cards and carrying bigger balances month to month.
JPMorgan Chase, the biggest U.S. bank, said in its most recent quarterly report that it saw higher revolving credit-card balances, or the amount people don’t pay off monthly. Capital One also said the proportion of people making just the minimum payment is above prepandemic levels.
“We’re seeing this minimum-payment effect across this credit spectrum. I’m not making a point here about the low end of the market or even about subprime,” said Richard Fairbank, CEO of Capital One, during an earnings call this week.
Fairbank said consumers overall are in good shape, but that some are feeling the cumulative effects of inflation andinterest rates more than others, particularly those whose incomes haven’t kept up with rising prices.
A report this week from the Federal Reserve Bank of Philadelphia echoed banks’ results. It found revolving credit-card balances in the third quarter hit their highest levels in data going back to 2012. The share of consumers making just the minimum payment also edged up.
The trends partly reflect easier access to credit in recent years. Credit-card issuers loosened underwriting standards during the pandemic, after government stimulus checks helped boost spending, while keeping delinquency rates down. This led to more cards being issued to riskier consumers, who have since been pressured by inflation, said Charlie Wise, senior vice president of research and consulting at TransUnion.
“They’re dealing with a lot in terms of cost-of-living challenges,” said Wise. “Many of these consumers aren’t homeowners, and we’ve seen significant increases in rent, as well as groceries, gas, child care and insurance.”
Bigger credit-card balances mean people are paying more in interest charges, with rates hovering around their highest levels on record. The average credit-card rate was around 21% late last year, according to data from the Federal Reserve.
This all helped generate more interest income and fees for JPMorgan Chase, Capital One, American Express and Discover Financial Services last year.
President Trump during his campaign said he would put a temporary 10% cap on credit-card rates, though he didn’t offer specifics and hasn’t promoted the idea since.
Credit-card delinquencies, meanwhile, continue to tick up. JPMorgan said 2.17% of accounts had balances that were more than 30 days past due in the fourth quarter, up from 2.14% the year prior. Customers with accounts 90 days past due also edged higher.
The bank also reported an increase in net charge-offs—loans it no longer expects to collect—driven primarily by its card business. Capital One and Discover Financial Services, waiting on a $35 billion merger approval, also both reported higher credit-card net charge-offs.
The rise in delinquency rates has been slowing, however, and banks aren’t flagging any serious signs of distress. Inflation is also starting to ease, and the labor market remains solid.
“For some consumers, the last couple years were a shock because prices rose so quickly,” Wise said.
Write to Angel Au-Yeung at angel.au-yeung@wsj.com
