Credit card spend remains strong in Q3, but delinquencies show no sign of easing

By the numbers: Major US credit card issuers highlighted growing credit card spend in their Q3 2023 earnings.

• Wells Fargo’s credit card point-of-sale (POS) volume totaled $35.2 billion for the quarter, up almost 15% year over year (YoY) and up 3.5% from the prior quarter.
• JPMorgan Chase’s combined debit and credit card sales volume grew 8% YoY and less than 1% on the quarter to reach $426.3 billion.
• Citi’s branded credit card volume hit $125 billion, up 4% YoY and down 1% quarter over quarter.

Why it matters: The strength of consumer credit card spending paints a more positive picture than we predicted. We expected that declining consumer sentiment would translate into slower or negative credit card volume growth this quarter.

But growing credit card spend isn’t all good news.

• US consumer credit card debt surpassed $1 trillion for the first time in July, per Federal Reserve Economic Data.
• Consumers are also carrying over larger balances each month. And record-high credit card interest rates have exacerbated the problem.
• More than half (51%) of US consumers say they can’t pay off their entire balance and accrue interest each month, according to a survey from JD Power. This is the highest level in years: 40% to 50% said the same between 2018 and 2022.

The impact: Issuers need to be wary of rising delinquency rates.

• Wells Fargo’s 30+ day delinquency rate hit 2.70%, up from 2.39% the prior quarter. Pre-pandemic in Q3 2019, the rate was 2.52%.
• JPMorgan’s 30+ delinquency rate for its card services rose from 1.70 in Q2 to 1.94%. The rate for Q3 2019 was 1.84%.
• Citi’s 90+ days past due rate was 1.3% for its cards; in Q3 2019, the rate was 1.25%.

However, it’s not cause for concern quite yet: Total overdue debt balances across all lengths of delinquency are remarkably low and sit well below pre-pandemic levels, according to data from the New York Fed. And both JPMorgan and Wells Fargo lowered their loan loss provisions in Q3, while Citi’s was flat—a vote of confidence for the US consumer.

The big takeaway: Despite some positive notes, Q3 was not without its share of economic warning signs. Issuers may want to tweak their offerings to help consumers remain financially stable, especially for demographics that are more at risk, like Gen Zers and households with children.

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

• Are you a client? Click here to subscribe.
• Want to learn more about how you can benefit from our expert analysis? Click here.