Credit Card Delinquencies Dip Amid Continued Consumer Spending

Credit card delinquency rates fell last month as consumers continued to spend.

As Seeking Alpha reported Sunday (April 28), the average delinquency rate dipped from 3.09% in February to 2.92% in March, though it has risen from 2.49% a year ago. The average is still higher than the pre pandemic 2.76% recorded in March 2019.

The average net charge-off rate, the report said, rose to 4.36% in March, compared to 4.24% in the previous month and 3.13% a year earlier. The pre-pandemic charge-off rate was 4.05%.

Four lenders, the report says, enjoy credit metrics more robust than before the pandemic began: Bank of America, J.P. Morgan Chase, American Express and Citigroup. Seeking Alpha notes that as COVID began, banks offered forbearances to customers while the government dolled out waves of stimulus money. 

Since then, however, consumers have exhausted much of the savings cushion they built up, while continuing to spend. 

Recent data from the Commerce Department shows consumers continuing to spend in the face of inflation. Those figures had consumer spending up 0.8% from February to March, while personal income was up 0.5%.

Consumers are, however, spending less, according to data released last week by the Bureau of Economic Analysis (BEA). It showed personal consumption growth dipping to 2.5% from 3.3% in the fourth quarter, reflecting a decrease in spending on goods. At the same time, the BEA noted that the personal consumption expenditures (PCE) price index rose 3.4%, compared with an increase of 1.8% in the fourth quarter of 2023.

“In other words, inflation is rising faster than spending, which indicates there’s pressure on consumers showing up in the numbers — and dragging on the economy’s growth,” PYMNTS wrote.

And as covered here last week, while the current earnings season has shown that consumers are spending and using their credit cards to do so, there is some indication of the pressures facing lower-income consumers.

“We may be moving toward a deepening bifurcation within the economy, where those making more than $50,000 are able to keep pedaling, as it were, in the paycheck-to-paycheck economy,” PYMNTS wrote. 

“And for those households below that income level — well, the challenges of keeping up with increased debt loads while inflation’s still entrenched have been taking a toll.”

That report added that there’s also signs that the cash cushions that could otherwise help boost at least some spending and help consumers pay down debts are seeing drawdowns as well.

For example, Bank of America’s earnings show that core consumer deposits fell 3% quarter over quarter, while J.P. Morgan reported that average deposits, on the consumer side, dropped 1% quarter over quarter and 7% year on year.