Credit Card Delinquencies Rise to 2.5 Percent Across Major Banks in July

The average credit card delinquency rate across seven major U.S. banks edged up from 2.48% in June to 2.50% in July, according to data compiled by Seeking Alpha. While the figure shows a slight upward tick, it remains below the pre-pandemic average of 2.68%.

The July Credit Pulse tracks financial metrics from American Express, Bank of America, Bread Financial, Capital One, Citigroup, JPMorgan, and Synchrony. Together, these institutions reported total credit card lending of $538.4 billion in July, slipping 0.2% compared to June balances.

Net Charge-Offs Decline as Borrowing Slips

Despite the minor increase in delinquencies, the banks’ average net charge-off rate moved in the opposite direction. According to the Seeking Alpha report, the net charge-off rate declined from 3.42% in June to 3.28% in July.

The Federal Reserve’s July Senior Loan Officer Opinion Survey on Bank Lending Practices noted that banks tightened lending standards for credit card loans during the second quarter. Meanwhile, demand for credit card loans remained basically unchanged over the same period.

Consumer Spending Resiliency Defies Economic Narratives

Data from other financial institutions highlight continued consumer spending despite inflationary pressures and higher gas prices. Visa reported July 28 that U.S. payment volumes moderated somewhat by July 21 after experiencing a sharp surge. Visa Chief Financial Officer Chris Suh stated during an earnings call that the earlier spike stemmed from tax refunds, fuel prices, retail promotions, Visa Direct, and FIFA-related spending.

Synchrony’s second-quarter results further challenge the narrative that consumers are pulling back due to financial strain. Synchrony reported an 8% year-over-year increase in purchase volume, rising from $46.1 billion to $49.8 billion.

Considering inflation and the cost of fuel, prevailing views suggest shoppers might crack or face severe financial pressure. Even with elevated inflation and rising gas prices, purchasing activity actually quickened, with [consumers] maintaining their expenditures, particularly on non-essential items.

Brian Wenzel, Synchrony