Credit Card Delinquencies Keep Hovering Above Pre-COVID Levels

America’s credit card companies ended December with delinquencies and charge-off rates essentially unchanged from November.

And as a Monday (Jan. 29) Seeking Alpha report notes, the average rates of charge-offs and delinquencies has hovered above prepandemic levels for last past several months. 

Delinquencies happen when borrowers fail to make payments on their debts on time. After enough time has passed, the creditor determines the debt is unlikely to be repaid and classifies it as uncollectible for accounting purposes, and it becomes a charge-off.

The exceptions to this trend, the report says, are three of the country’s largest banks — JPMorgan Chase, Citigroup and Bank of America — where those rates remain below December 2019 levels.

At American Express, consumer card delinquencies are below pre-pandemic levels, while net-charge offs are somewhat above December 2019 territory.

As PYMNTS reported last week, Amex management said the rates showed that credit trends were normalizing. Card member loans that were 30 days past due accounted for 1.4% of loans, up from 1.3% in the third quarter, but the same percentage from the fourth quarter of 2019.

The Seeking Alpha report says that the card issuers that saw the largest decline in credit quality are Bread Financial and Capital One. Bread’s net charge-off rate is more than 200 basis points higher than it was in December 2019, while Capital One’s is 100 points above that level.

During its earnings call last week, Capital One reported that its net charge-offs came to $2.53 billion, higher than the $2.36 billion predicted by analysts and up 77% from the previous year.

The chief culprit? Borrowers falling behind on credit card and auto loan payments.

“The pandemic was such an absolutely unusual experience for consumers with the stimulus and forbearance, we believe some charge-offs got delayed,” said Richard D. Fairbank, founder, chairman and CEO at Capital One.

Still, Fairbank added that the company feels “good about all of our segments across card, and also the relative health of the consumer.”

The Seeking Alpha report notes that credit card metrics enjoyed an exceptionally strong 2020 and 2021 thanks to government stimulus funding and forbearance plans offered by lenders. Since then, delinquency and net charge-off rates have gradually begun to return to normalcy.