What a raft of credit card data says about consumer financial health

The data: A deluge of government and private credit card data came out this week offering conflicting views of the state of consumers’ financial health.

• Outstanding credit card balances hit $1.14 trillion in Q2, per the New York Fed—a record high after falling slightly in Q1. The number of open credit card accounts increased by about 2.5 million.
• Aggregate credit card limits hit a record $4.92 trillion, per the New York Fed.
• Twenty percent of banks said they were tightening their credit card lending standards, per the Fed’s July Senior Loan Officer Survey.
• Just 2% of banks reported stronger demand for credit cards, after six consecutive quarters of negative or flat growth.
• Early delinquencies ticked up to .71% in June, per VantageScore’s Credit Gauge—up on the month but flat YoY. Delinquencies across every timeframe are down year to date.

So, what’s it all mean?

• Banks are unreliable narrators. Not since 1996-1998 have so many banks said they were tightening their credit card lending for so many consecutive quarters. And yet, YoY credit limit increases are outpacing balance increases, and issuers have acquired nearly 21 million credit card accounts over the same period.
• That so-called tightening isn’t working. After 60 months, roughly 9% of accounts originated in 2019 were 90+ days past due, per an August CFPB study. But in half the time, nearly 10% of accounts originated in 2022 were 90+ days past due, and 2023 vintages are following a nearly identical curve.

Our take: Banks shouldn’t overreact to a few bumps on the way to normalized credit card behavior.

• Across all account types, the share of accounts that are current on payment (96.8%) is higher than at any point before the pandemic—thanks in large part to federal policies sending student loan delinquencies to near-zero. That gives consumers some breathing room to contain their credit card debt.
• And if the Federal Reserve sticks to script and starts cutting rates in September, consumers could get substantial relief from their record-high credit card interest rates. Refinancing or transferring their balances to a lower rate will offer further relief from pressures on their overall financial health.