Credit card debt load may be a warning sign for card issuers heading into Q4

The data: Among US respondents who carry over credit card debt from month to month, 60% have been in debt for at least a year, up from 50% a year ago, according to a survey.

  • Nearly half of respondents said emergencies and unexpected expenses were the primary reason for their debt.
  • Twenty-four percent pointed to day-to-day expenses like groceries, childcare, and utilities as the cause.

How we got here: Although total credit card balances are about 4% lower than in 2019, high inflation might be fueling credit card spending and making it harder for consumers to pay off their debt. The consumer price index rose 8.3% year over year (YoY) and 0.1% month over month in August. And the Federal Reserve’s interest rate hikes have also made accruing debt more expensive.

This has credit cardholders concerned: Fifty-one percent of cardholders with debt believe that persistently high inflation would have a major impact on their ability to make at least their card’s minimum payment over the next year, per

What this means: As fears of an economic downturn intensify, card issuers need to strike a balance between meeting lending demands and protecting their balance sheets (in case consumers can’t make the minimum payments on their credit cards).

This might mean tightening credit card issuing standards and prioritizing payment flexibility—which many issuers did at the onset of the pandemic.

We outlined short-term and long-term changes for credit card issuers in our “Era of Uncertainty: Credit Cards” report:

  • In the short term, a recession may cause a pullback on credit card spending—consumers tend to lean on debit cards during times of economic uncertainty. At-risk consumers may also struggle to pay back their balances, which could expose issuers to higher delinquency and charge-off rates. The data may be an early indicator of this.
  • In the long term, buy now, pay later (BNPL) could become even more popular as consumers turn to interest-free solutions, which could hurt spending for issuers that haven’t yet invested in BNPL or some other form of flexible financing. Issuers may update rewards to focus more on essential spending categories like groceries and fuel.

Why it’s worth watching: Q3 earnings are fast approaching, and issuers may report yet another quarter of elevated spending, which inflation likely played a role in.

In Q2, Visa, Mastercard, and several large card issuers claimed inflation played a minimal role in otherwise organic customer spending growth. Q3 earnings commentary will paint a clearer picture of how consumer spending fared as more economists suggest the US is headed toward a recession within the next year.

This article originally appeared in Insider Intelligence's Payments Innovation Briefing—a daily recap of top stories reshaping the payments industry. Subscribe to have more hard-hitting takeaways delivered to your inbox daily.