Card Delinquencies, Pressure on Account Openings Signal Rocky Road for Banks, Payment Networks

Earnings season begins anew in just a few weeks, documenting the first few months of the year — and how the March quarter shaped up for all manner of enterprises.

And for the payment networks, for the banks too, there may be some headwinds in card-related activity.

New account activity, of course, can help keep revenues humming, as consumers open those accounts with the intent to spend. New account openings lead to loan growth and, conceivably, to use of ancillary financial services and products.

As reported here, VantageScore’s Credit Gauge shows delinquencies climbing across all tiers of credit, as early-stage delinquencies bumped up from just under 1% in January to more than 1% in February. And as reported, new loan account originations fell in every category during February except for auto loans. Credit card originations fell across all generations except what might be termed the “silent” generation, (1928-1945), which saw a minor increase. All told, the data indicate that 3% of holders opened new accounts in February, down from a 3.7% peak seen as recently as the middle of the last year.

Some Paydown in Sight

There’s been some evidence of debt paydown, at least early into the year. In terms of that paydown — perhaps spurred by tax refunds received by relatively early filers this year — consumers paid down $417 of their debt balances in February 2024 compared to January 2024. But at the same time, credit utilization stood at a bit more than 52%, which is the lowest level seen in roughly three years.

Lower credit utilization serves as a reference point that consumers’ credit standing remains relatively healthy. But it also reminds us that lower utilization rates mean that cardholders — which would include existing accounts — are not spending with the same velocity they once were.

We’ll get more information when earnings season ramps up again. But the signals, as noted above, indicate that some of the momentum seen in past quarters may be a challenge to match. As seen here, Visa, for example, showed credit card volumes surging by 8%, and that new credit cards issued notched a 4% growth rate. Mastercard’s most recent earnings detailed that card growth was 8%, and credit card spending was up 5.5% in the quarter.

And among the banks, JPMorgan, the largest player in the space, put up data that spotlighted card spending in the high single digits.

PYMNTS Intelligence data found late last year that, as measured as a percentage, U.S. consumer debt is 348% of disposable income and that high-debt consumers average 14 late payments on their debt every year.