Consumer Payment Card News

Credit Card Losses & Bubbling Consumer Confidence

U.S. consumer credit card losses are rising no matter how you slice or dice it, reflected by all indices. In the face of a strong economy, bubbling U.S. consumer confidence may have induced cardholders to bite off more than they can chew. Americans are falling further behind in credit card payments as reflected in the amount of consumer credit card debt more than 30 days past due as well as accounts seriously past due (more than 90 days).

The past-due payments eventually show up as losses or a charge-off to the credit card issuer.

Credit Card Losses

Deadbeat Outlook

After the “Great Recession” of 2009 the aggressive stimuli provided by the government to the financial community has led to the longest running economic recovery. A change is looming and bankers know it. The failure of the tax cuts to produce any meaningful impact on the economy, rising trade tariffs and other reckless American foreign policies, i.e. war(s), point to a global slowdown.

Wall Street and Main Street are currently fueled merely by confidence and optimism the recovery party will continue, notes Robert McKinley, Senior Analyst of CardTrak, CardData and CardFlash. When a serious correction occurs the stage is set for an alarming rise in credit card past-due accounts and charged-off accounts, as Americans will deal with the highest credit card interest rates of more than 25 years.

U.S. Credit Card Metrics

The latest S&P/Experian Consumer Credit Default Indices for April reveals consumer credit defaults fell four basis points (bps) from last month, to 0.88%. The bank card default rate rose 15 bPs to 3.83%. The auto loan default rate was unchanged at 0.94%. The first mortgage default rate was five basis points lower at 0.65%.

Credit card delinquency is also rising among the nation’s top issuers prompting issuers to beef-up loan loss reserves.

U.S. revolving card debt fell apart in March declining 2.5% over March 2018. The decline produced the second weakest quarter for credit card debt over the past five years, growing a measly 1.4% over the first quarter of last year. Among the top four U.S. credit card issuers, with a 40%+ marketshare, credit card debt only increased 3.4% in the first-quarter, according to CardTrak.

Top 100 Bank U.S. Credit Card Issuers Charge-Offs

Credit card charge-offs, seasonally adjusted (SA), among the top 100 U.S. banks for the first-quarter (1Q/19) edged up three basis points (bps) from the prior quarter, but down six bps year-on-year (YOY).

On a not seasonally adjusted basis (NSA), the charge-off rate among the top 100 U.S. banks for 1Q/19, rose 28 bps from the prior quarter and up five bps YOY.

Compared to two years ago, the SA charge-off ratio is up 12 bps, and the NSA charge-off ratio is up 23 bps according to CardData.

According to the Federal Reserve, the top 100 U.S. banks posted a SA charge-off rate of 3.58% for 1Q/19, compared to 3.55% in 4Q/18, and 3.64% for 1Q/18. For 1Q/14 the SA charge-off rate stood at 3.21%.

On a NSA basis the top 100 U.S. banks posted a charge-off ratio of 3.78% for 1Q/19, compared to 3.50% in 4Q/18, and 3.73% for 1Q/18. For 1Q/14 the NSA charge-off rate stood at 3.31%.

Big 6 U.S. Issuers Credit Card Charge-Offs

First-quarter charge-offs among the Big 6 domestic credit card issuers rose sharply as loan loss reserves are beefed-up across-the-board. Credit card charge-offs among the nation’s Big 6 credit card issuers rose 14 basis points (bps) year-on-year (YOY) for the first-quarter (1Q/19), and up 34 bps sequentially. 

The Big 6 (Chase [JPM], Capital One [COF], Bank of America [BAC], Citibank [C], American Express [AXP], Discover [DFS]) reported an aggregate charge-off ratio of 3.65% for 1Q/19, compared to 3.31% for 4Q/18 and 3.51% for 1Q/18, based on figures gathered by CardData.

The first-quarter charge-off ratio is the highest in at least the past five years, increasing 81 bps, compared to 1Q/15, according to RAM Research.

Top 100 Banks Credit Card Charge-Offs (Seasonally Adjusted)

1Q/14: 3.21%
1Q/15: 2.89%
1Q/16: 2.99%
1Q/17: 3.46%
1Q/18: 3.64%
1Q/19: 3.58%

Additional Current & Historical Quarterly Top 100 Seasonally Adjusted Charge-Off Data

Top 100 Banks Credit Card Charge-Offs (Not Seasonally Adjusted)

1Q/14: 3.31%
1Q/15: 3.00%
1Q/16: 3.13%
1Q/17: 3.55%
1Q/18: 3.73%
1Q/19: 3.78%

Additional Current & Historical Quarterly Top 100 Not Seasonally Adjusted Charge-Off Data

Average Big 6 U.S. Credit Card Charge-Offs

1Q/15: 2.84%
1Q/16: 2.86%
1Q/17: 3.26%
1Q/18: 3.51%
1Q/19: 3.65%

Additional Current & Historical Quarterly Data for Big 6 Issuer U.S.Charge-Offs

Source: Federal Reserve; S&P; RAM Research; CardFlash; CardData; CardTrak