Discover Reports Rising Credit Card Delinquency Rate

Discover Financial’s credit card delinquency rate has been rising each month since May 2022.

The firm said in a Monday (Feb. 13) filing with the Securities and Exchange Commission (SEC) that the percentage of loans that were delinquent 30 or more days reached 2.67% in January, having climbed each month from the 1.71% rate reported in May 2022.

Seeking Alpha reported Monday that the delinquency rate had reached pre-pandemic levels, as January’s rate was slightly worse than the 2.65% seen by Discover Financial in January 2020.

Discover Financial’s net principal charge-off rate reached 2.81% in January, which was the highest the company had seen since February 2021, when the rate was recorded at 3.15%.

The company’s net principal charge-off rate is still far better than the 3.45% seen in January 2020, according to the Seeking Alpha report.

As PYMNTS reported in December, credit card delinquency rates are on the rise, as evidenced by reports from banks and payment networks.

As delinquency rates creep up, it may be the case that consumers who live paycheck to paycheck are finding it harder to meet their monthly obligations because inflation is making it hard to triage just where their money goes.

PYMNTS research has found that paycheck-to-paycheck consumers are three times more likely than other cohorts to revolve credit card debt and carry higher monthly balances overall.

Those consumers who never pay their credit balances in full also tend to hold more credit cards than average, according to “New Reality Check: The Paycheck-to-Paycheck Report: The Credit Edition,” a PYMNTS and LendingClub collaboration.

The pressure on consumers has been showing up in auto loan delinquencies as well. Recent earnings filings have shown that 30-day delinquency rates were 5.6% in the fourth quarter of 2022, up from 4.3% in the same quarter a year earlier.

Debt consolidation and lower rates paid on that debt are proving to be an avenue of some relief, Discover’s management said during an October earnings call.

“A rising rate environment creates a lot of focus on debt consolidation, which is the primary use of our personal loans,” Discover CEO Robert Hochschild said during the Oct. 31 call.