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Card Delinquencies Keep Falling as Lending Creeps Up

banks, earnings, charge-offs, delinquencies, economy, consumer finance

Credit card delinquencies reportedly fell in April amid signs of improved lending activity.

That’s according to a report Monday (May 20) from Seeking Alpha, citing data from eight different lenders. Lending came to $497.5 billion in April compared to $496.8 billion in March, but was 9.2% higher year over year.

The report includes comments from Jefferies analyst John Hecht, who wrote that the April card results reflected seasonally lower delinquency and net charge-off rates for most card companies, with better-than-expected seasonal trends for Discover, Capital One and Bread.

“Delinquencies are showing signs of having potentially peaked in Jan. ’24 (seasonally adjusted) as there is a consistent decline in growth Y/Y percentage,” Hecht wrote.

And Baird analyst David George said U.S. consumer credit metrics were “a bit mixed,” but overall suggest “healthy trends, with slower spending/borrowing growth on the margin. However, we remain cautious on the card names as soft landing expectations seem priced-in and risk/reward appears unattractive.”

Coming into this year, consumers were heavily reliant on credit cards, as PYMNTS wrote earlier this month. Research by PYMNTS Intelligence shows that 31% of consumers reported reaching their credit card limit, which averaged $9,200, at least occasionally over the prior year. 

“That share more than doubled for consumers living paycheck to paycheck with issues paying their monthly bills,” the report said. 

“Nearly two-thirds of those in this group reported that they had reached their credit card limits, which averaged $5,900, at least occasionally in the last 12 months.”

Meanwhile, PYMNTS last week examined the use of digital wallets as a hub for cards, with 80% of consumers saying they’d use a digital wallet for a range of functions.

“In recent months, there has been a shift in card spending (with momentum in debit), as using debit cards as the underlying digital wallet payment method when buying groceries has doubled in the last year,” that report said.

The research found, for example, that debit cards accounted for 55% of digital wallet spending for groceries among younger consumers, while older, high-income consumers used credit cards for 42% of retail purchases.