Bankers Worried Over Credit Card Balances Paid In Full

Consumers are continuing the pandemic-fueled habit of paying off credit card balances, a practice that now has bankers more than a little worried, The Wall Street Journal reported Tuesday (May 11).

Some of the biggest banks in the U.S. are stepping up marketing efforts and sweetening the benefits pot to attract a larger and stronger customer base of card users. In earnings calls, some banks — Discover and Capital One for example — indicated that it’s been more than 20 years since people paid off credit card balances in the first quarter at the rate currently being seen now. 

The biggest retail credit card issuer in the country, Synchrony Financial, told WSJ that payment rates have increased beyond the pandemic average, dropping 7 percent from the first quarter of 2020. Discover saw a 9 percent decline in card balances, while Capital One experienced a drop of 17 percent, per WSJ.

Last year in the midst of the pandemic, bankers were forecasting an escalation in the number of people who would tap credit cards to cover bills and other expenses. Federal relief programs, including a boost in unemployment, helped make it easier for people to pay off higher-interest debt like credit cards while pausing mortgages and student loans.

Big banks are benefiting from the low level of delinquencies coupled with accelerated spending by consumers. While credit usage dropped off, there was a concurrent uptick in debit card spending. Equities trading revenues were also up, with JPMorgan, by way of example, seeing a 47 percent boost in the first quarter of this year.

Consumer borrowing in the U.S. declined some $1.3 billion at the start of this year, the biggest drop-off since August 2020s $9 billion. Consumer borrowing drives two-thirds of the country’s economic activity and is a measurement tool to help determine how much the average shopper is OK with financing.