One of the consistencies in trying to assess the economy during the past couple of years has been the consistency with which the economy seems to be heading in multiple directions simultaneously. One day, there is data that suggests the economy is improving and interest rates are going to start coming down. The next, there is a different data point that indicates things are not as rosy as they seemed the day before and that a recession is closer on the horizon than once thought. Delinquency rates on some of the largest financial institution’s credit card portfolios show a similar dynamic, with some going up and others going down during the first quarter of 2024.
JPMorgan Chase and Wells Fargo reported slight increases in their credit card delinquency rates while Citi reported that delinquency rates actually dropped. It is expected that credit card delinquency rates will remain high as long as interest rates remain elevated and will not come down until the Federal Reserve Board starts lowering its key target rate.
The delinquency rate for credit cards at Chase was 2.23% at the end of the first quarter, compared with 1.68% a year ago. At Wells, the delinquency rate was 2.92%, up from 2.18% last year.
The average interest rate on credit cards remained around 21% in the first quarter. Prior to the pandemic, that figure was closer to 15%. But the elevated interest rates and higher delinquency rates do not appear to be impacting the spending habits of consumers. Credit card transaction volume at Wells Fargo increased 14% on a year-over-year basis and the amount of unpaid credit card balances has risen for nine consecutive quarters.
