Credit Card Customers Falling Behind On Payments at Historic Rate

(KNSI) – Americans are falling behind on their credit card payments, casting concerns about the holiday retail season.

Capital One filed paperwork with the Securities and Exchange Commission this week showing net charge-offs of over five percent in October, the highest since the financial crisis. Discover Financial was at 4.42%. A year ago, the net charge-off rate for Discover was 2.1%, less than half of the most recent mark. The figures represent the percentage of overall loans that will never be repaid.

Discover customers were carrying over $13 billion more on their cards compared to October 2022. With charge-offs rising, companies could be forced to stop approving credit limit increases. That would curb consumers’ overall buying power for gifts and holiday travel.

The data lends credence to figures released by The Conference Board. The organization’s Consumer Confidence Index continues to signal an expectation of a recession within the next year. The future conditions reading of 75.6 in October was down from the month before. Anything under 80 sparks concern.

The Bureau of Labor Statistics reported a lower Consumer Price Index than expected Tuesday. The figure was unchanged from the month before and was up 3.2% year-over-year. The main factors helping keep prices in check included fuel, natural gas, and used vehicle sales. Capital One breaks out delinquency rates for auto loans. The figure in October was up to over 6%.

High interest rates combined with increasing supply as we get further away from the pandemic and more repossessions hitting dealer lots will help the trend continue while also capping new vehicle prices. However, it adds to growing concern about a tapped-out consumer at the start of the most important shopping season of the year.

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