From gas and groceries to lodges and airline tickets, customers are placing extra purchases on bank cards—and taking longer to pay them off.
The 4 largest U.S. banks reported greater bank card spending in 2023 in contrast with the earlier yr. In reality, since 2020, bank card spending has steadily elevated at three of the 4. The exception is Citigroup, the place bank card spending hit a latest peak in 2021.
At JPMorgan Chase, the nation’s largest financial institution, bank card spending was up 9% in 2023 to $1.2 trillion. At Wells Fargo, spending was up 15%.
Delinquency charges have additionally been on a gentle rise since 2021.
Prospects aren’t paying off their prices as shortly as they used to. Bank card loans, or unpaid balances on accounts, jumped 14% at JPMorgan in contrast with a yr earlier and 9% at Financial institution of America. Bank card loans had been additionally up at Citigroup and Wells Fargo.
In combination, bank card loans on the 4 banks grew sooner than spending in 2023. The unpaid balances additionally surpassed 2019 ranges for the primary time, exhibiting that customers are placing extra purchases on playing cards and taking longer to repay their payments than they had been earlier than the pandemic.
In principle, that is good for the banks that cost curiosity on customers who carry a steadiness. However rising card balances could possibly be an indication of worsening monetary ache for customers and the economic system.
Whereas banking executives maintained that customers right now are high quality—pointing to a powerful labor market as an indication that they’ll repay greater bank card balances—rising delinquencies may point out that customers are struggling to pay greater payments.
“Customers have been spending greater than they’re taking in,” mentioned JPMorgan Chief Monetary Officer Jeremy Barnum throughout an earnings name with analysts. It is going to be necessary to see how they regulate in 2024 as money buffers—beforehand padded from pandemic stimulus checks and scholar mortgage pauses—are spent down, Barnum mentioned.
Client deposits on the 4 banks declined in 2023. At JPMorgan, deposits within the shopper banking unit had been down 3%, whereas deposits in Citigroup’s U.S. shopper banking arm fell 8%.
Client deposits fell 8% at Financial institution of America and 9% at Wells Fargo.
The deposit decline is partly from prospects’ transferring their cash to higher-yielding options, Wells Fargo executives mentioned. Nonetheless, they acknowledged that lower-income households are feeling squeezed.
“The additional you go down in earnings ranges or the additional you go down in wealth ranges, the cumulative affect of inflation has actually taken a toll,” mentioned Wells Fargo CFO Michael Santomassimo. “In some circumstances, they’ve been having to construct greater bank card balances.”
Write to Angel Au-Yeung at angel.au-yeung@wsj.com
Supply: Live Mint