Earnings Season Sheds Light on Rising Card Delinquencies

Credit card debt is at an all-time high.

Although it’s not yet fully in the rear-view mirror, earnings season is signaling that where there’s smoke, there may be fire — or are at least some sparks.

Drilling down into the supplementals and Securities and Exchange Commission (SEC) filings from some of the payment networks and banks, the data shows that delinquency rates are rising, dovetailing with PYMNTS’ findings that credit cards have been a lifeline in managing daily expenses. But it’s getting harder to keep up with those obligations.

The pressures seem to cut across all demographics.

American Express, which has typically drawn more affluent clients, noted in its presentation materials that, although write-off and delinquency rates are below pre-pandemic levels, they’re marching higher. The card member loans that are over 30 days past due stood at 1.2% in the most recent quarter, up from 1.1% in the fourth quarter and 0.8% in the first quarter of last year.

Discover Financial Services’ materials show that the 30-day delinquency rate for its credit card loans was 2.8%, where that metric had been 1.8% last year. The net principal charge-off rate was 3.1% in the most recent period, up from 1.8% last year. Discover’s SEC filing disclosed that 81% of its credit card loans were made to consumers with at least a 660 FICO score; the remainder fell below that threshold, so the increasing delinquencies reflect a broad swath of prime and near-prime demographics.

Capital One’s SEC filing noted that 30+ day performing delinquency rates were 3.7% in the first quarter of 2023, increasing from 2.4% last year.

J.P. Morgan showed that the charge-off rate in its card services business was 2.1% in the first quarter, and that percentage had been 1.4% last year. An SEC filing released last week detailed that at the end of last year, the percentage of total receivables at least 30 days delinquent was 0.8%, and had been 0.7% at the end of 2021.

Wells Fargo’s earnings supplementals revealed a 30-day+ delinquency rate of 2.3% in the first quarter, up from 1.6% last year.

The Pressure’s Mounting

The stats, then, tell a tale against a backdrop in which credit card debt stands at a record $930 billion, per stats from the Federal Reserve, as measured in the fourth quarter of 2022.

Management commentary from earnings calls has pointed to an economy where credit performance is normalizing.

PYMNTS data gleaned in collaboration with Sezzle in the report, “How Credit Insecurity Is Changing U.S. Consumers’ Borrowing Habits,” showed that even though 69% of consumers are “credit secure,” which means they have access to credit and use it, roughly 64% of them live paycheck to paycheck. With a bit more granular insight, 22% of credit-secure individuals live paycheck to paycheck and have issues paying their bills.

PYMNTS also found that only 45% of consumers pay their balances in full each month, which means that chipping away at credit card debt is a work in progress at best and a challenge at worst. And it can result in missed payments and rising delinquency rates.