Credit Card Delinquencies Crept Up in September Amid Renewed Spending

Consumers spent with confidence last month as retail sales climbed.

And as Seeking Alpha noted in its “Credit Pulse” report Sunday (Oct. 27), much of that spending happened with credit cards, with loans at seven major card issuers increasing slightly — 0.4% month over month — to $40 billion.

Delinquency rates climbed as well, though net charge-offs declined, the report said, citing an average from seven banks.

The average delinquency rate rose to 2.99% from 2.88% in August and 2.84% in September of last year, while the net charge-off rate — loans banks consider uncollectable — fell from 3.86% in August to 3.79% last month.

Of the seven banks included in the report, J.P. Morgan Chase enjoyed the lowest levels of charge-offs and delinquencies, coming in below pre-COVID levels.

Meanwhile, American consumers are feeling somewhat more positive, especially about “buying conditions,” according to the latest findings from the University of Michigan’s Survey of Consumers, released last week.

The survey came in at the highest level since April 2024 — and is now more than 40% higher than had been recorded at the most recent low point, in June 2022.

The survey found that the index level of 70.5 was higher than the 70.1 recorded last month and, according to Survey Director Joanne Hsu, down to modest improvements in buying conditions for durables, in part because of easing interest rates.

“All year, consumers have repeatedly told us that the trajectory of the economy hinges on who becomes the next president,” Hsu said. “Given the close nature of the presidential race, many consumers will be updating their expectations of the economy after the election is resolved, and sentiment may be somewhat unstable in the months ahead as consumers form their views on what the next presidency will look like.”

Also last week, Capital One released earnings that suggest its customers were embracing credit as a key payment method, with CEO Richard Fairbank noting that consumers remained in “good shape.”

CFO Andrew Young told analysts on an earnings call that “our credit outlook has improved slightly as our confidence in the stability of underlying credit trends has grown, driving a modest release and allowance.”

Fairbank said that card loan balances had climbed 6% year over year, and the period-end loans held for investment came to $149.4 billion. The company’s 30-plus delinquency rate at the end of the quarter was 4.5%, a 0.22% increase.

“The pace of year-over-year increases in both the charge-off rate and the delinquency rate have been steadily declining for several quarters and continued to shrink in the third quarter,” he said.