Credit Card Delinquencies on the Rise
U.S. banks and card companies reported a rise in the credit card delinquency rates in August, the second consecutive monthly increase after four months of decreases.
While rates are still below those found during the 2008 financial crisis, rising delinquencies mean higher loan losses for lenders.
Financial institutions are reporting the following increase in delinquencies from July to August:
- JPMorgan Chase rose 1.16% from 1.15%
- Capital One rose 3.97% from 3.81%
- Discover rose to 2.1% from 2%
The New York Fed has reported that seasonally adjusted credit card delinquency rates rose 2.47% in the second quarter, which is up from 2.20% during the same period last year.
“A noticeable rise in delinquency rates, even from very low levels, is worth paying attention to,” said Andrew Haughwout, senior vice president at the New York Federal Reserve.
At the same time that credit card delinquency rates are rising, so are household debt levels. Earlier this year, they surpassed their pre-crisis peak and are hovering near record highs. While employment levels are improving, income remains stagnant, and American households are extending their credit card, mortgage and auto debt repayments.
The New York Fed found serious delinquency levels are more common among borrowers with credit scores below 660.
“It is not clear yet what effect it will have on the future. But historically it has been the case that once these delinquency rates start to rise, they can continue to rise,” Haughwout said.