Charge-offs on credit cards went up in March, a sign that people are having trouble paying their bills.
On paper, the average rate of credit card late payments and charge-offs was lower last month than it was in February, according to a story from Seeking Alpha on Sunday, April 30.
But the report says that these numbers are skewed by Bread Financial, which usually posts higher net-charge-off rates than its peers.
Subtract Bread’s numbers, which show that the net-charge-off rate went from an average of 2.46 percent in February to 2.60 percent in March, which is worse. Even without Bread, the rate of late payments went down a little from 1.98% in February to 1.96% last month.
Credit card issuers have increased their loan loss provisions in recent earnings reports, according to Seeking Alpha.
In fact, the first quarter of this year, the country’s four biggest banks wrote off $3.4 billion in bad loans, which is a 73% increase from the first quarter of 2022.
The world’s biggest credit card company, JPMorgan Chase & Co., said in its Q1 earnings report that bad credit card loans jumped by 82% from the same quarter in 2022 to $922 million in the first quarter.
But officials said earlier this month that they don’t think they need to do anything drastic. Instead, they are paying more attention to the housing market.
“I wouldn’t use the word credit crunch,” CEO Jamie Dimon said. “Obviously, there’s going to be a little bit of tightening and most of that will be around certain real estate things.”
According to data, credit card debt is rising among consumers. In many cases, they barely have enough money in savings to pay off their bills.
The February 2023 edition of the “New Reality Check: The Paycheck-to-Paycheck Report,” a collaboration with LendingClub, found that consumers with trouble paying their monthly bills average 157% of their available savings, meaning they would still have a balance if they drained their savings to pay their debts.
People who live salary to paycheck but don’t have trouble paying their bills are in a slightly better position. Their credit card balances are equal to about two-thirds (62%) of their savings. As expected, the ordinary consumer with no debt problems is in the best financial situation, carrying card amounts equal to 35% of their savings.
Still, economic and inflationary pressures will continue to eat away at both savings and spending power, so many people will need to continue to change and tighten their spending habits to deal with the challenges of today’s macroclimate.
