Ad Banner
Advertisement by Open Privilege
United States

Credit card industry faces growing financial strain

Image Credits: UnsplashImage Credits: Unsplash
  • Credit card losses are rising sharply, with delinquencies hitting their highest levels since 2011 and losses projected to peak at nearly 5% in early 2025.
  • U.S. consumer credit card debt has surpassed $1 trillion, driven by inflation, interest rate hikes, and the end of pandemic-era financial support.
  • Financial institutions are tightening lending standards, adopting predictive analytics, and increasing loss provisions to prepare for a possible recession.

[UNITED STATES] Credit card companies are facing mounting challenges as they anticipate a potential economic downturn. Rising credit card delinquencies and increasing losses are prompting financial institutions to adjust their strategies and prepare for a more challenging economic environment.​

Surge in Credit Card Losses

Credit card losses have been climbing at an accelerated pace, reaching 3.63% as of early 2025, a significant increase from the low of 1.5% in September 2021. Analysts at Goldman Sachs project that these losses could peak at 4.93% by late 2024 or early 2025, marking the most significant rise in nearly three decades outside of the Great Financial Crisis.​

Recent data from the Federal Reserve Bank of New York further underscores the trend, showing that the percentage of credit card accounts transitioning into serious delinquency—defined as 90 days or more past due—has reached 6.36%, the highest level since 2011. Economists attribute this uptick to a combination of persistent inflation, rising interest rates, and stagnating wage growth, which have eroded household purchasing power and increased financial strain on lower- and middle-income families.

Record High Consumer Debt

The surge in credit card losses coincides with record-high consumer debt levels. As of the second quarter of 2023, Americans owed over $1 trillion in credit card debt, according to Federal Reserve data. This unprecedented debt load is contributing to the increasing number of delinquencies and charge-offs.​

Compounding the issue is the shift in consumer behavior post-pandemic. As government stimulus programs ended and student loan payments resumed, many households turned to credit cards to bridge spending gaps. A 2024 study by the Urban Institute found that nearly 40% of Americans reported relying more heavily on credit to cover basic expenses such as groceries, medical bills, and utilities, up from 28% in 2021.

Impact on Financial Institutions

Major credit card issuers are experiencing the effects of rising delinquencies. Capital One reported a 4.6% increase in net charge-offs to $2.74 billion, while American Express and JPMorgan Chase have also observed upticks in charge-offs and delinquencies. These developments are prompting banks to bolster their provisions for potential losses.​

To manage the risks, several institutions are implementing tighter lending standards. According to a recent survey by the Federal Reserve, more than 60% of banks reported having tightened credit card approval criteria in the first quarter of 2025, citing concerns over borrower creditworthiness. These adjustments include reducing credit limits, increasing interest rates for new applicants, and scaling back rewards programs to mitigate exposure.

Economic Outlook and Industry Response

The broader economic outlook remains uncertain, with some analysts predicting a moderate recession. In response, credit card companies are focusing on controlling asset quality and adjusting their lending practices. For instance, the Thai Bankers' Association's credit card club anticipates a challenging year ahead, with subdued economic performance and increased non-performing loans.​

Industry analysts also note a growing emphasis on predictive analytics and artificial intelligence to identify early signs of borrower distress. By leveraging data on spending habits, payment patterns, and macroeconomic indicators, card issuers aim to proactively intervene—offering payment plans or temporary relief—before defaults occur. This shift marks a broader trend toward more data-driven risk management practices across the financial sector.

As credit card losses continue to rise and consumer debt reaches unprecedented levels, financial institutions are preparing for a potentially challenging economic period. The industry's response will be crucial in navigating the evolving economic landscape and mitigating potential risks associated with increased delinquencies and losses.


Ad Banner
Advertisement by Open Privilege
Finance World
Image Credits: Unsplash
FinanceMay 7, 2025 at 11:00:00 AM

China eases rates to offset tariff impact

[WORLD] China has announced a reduction in interest rates and a series of measures to make bank lending more accessible. The central bank’s...

Finance World
Image Credits: Unsplash
FinanceMay 7, 2025 at 10:00:00 AM

China cuts reserve ratio to boost economy

[WORLD] China's central bank has announced a reduction in the reserve requirement ratio (RRR) for banks. This policy adjustment aims to inject liquidity...

Investing United States
Image Credits: Unsplash
InvestingMay 7, 2025 at 6:30:00 AM

Senate confirms Bisignano as Social Security commissioner amid Partisan clash

[UNITED STATES] The Senate has confirmed Frank Bisignano as the new commissioner of the Social Security Administration (SSA), marking a significant leadership shift...

Finance Singapore
Image Credits: Unsplash
FinanceMay 7, 2025 at 12:30:00 AM

Credit Suisse unit pleads guilty to U.S. tax evasion charges

[UNITED STATES] A unit of Credit Suisse pleaded guilty on May 5 to U.S. charges related to helping wealthy American clients evade taxes,...

Finance
Image Credits: Unsplash
FinanceMay 6, 2025 at 11:00:00 AM

Hong Kong stocks gain on foreign inflows and stimulus hopes

[WORLD] Hong Kong stocks saw modest gains on Tuesday, buoyed by optimism surrounding foreign investments in local assets, which helped drive the city’s...

Finance Malaysia
Image Credits: Unsplash
FinanceMay 6, 2025 at 10:00:00 AM

FBM KLCI holds steady ahead of key rate decision

[MALAYSIA] The FTSE Bursa Malaysia KLCI (FBM KLCI) has maintained a narrow trading range in recent sessions, reflecting investor caution ahead of significant...

Finance Malaysia
Image Credits: Open Privilege
FinanceMay 5, 2025 at 10:00:00 AM

Ringgit gains as weaker Dollar and trade optimism boost sentiment

[MALAYSIA] The ringgit opened marginally stronger against the US dollar on Monday, buoyed by a softer greenback amid dovish signals from the US...

Finance World
Image Credits: Unsplash
FinanceMay 5, 2025 at 9:00:00 AM

Asian currencies stabilize on Fed caution

[WORLD] Asian currencies have steadied in early May 2025, following a period of volatility driven by shifting expectations around U.S. monetary policy. The...

Finance World
Image Credits: Unsplash
FinanceMay 5, 2025 at 8:30:00 AM

Hong Kong IPO rush gains momentum as market sentiment improves

[WORLD] A wave of initial public offering (IPO) applications is sweeping the Hong Kong stock exchange, as companies move quickly to tap into...

Finance World
Image Credits: Unsplash
FinanceMay 5, 2025 at 7:30:00 AM

Hong Kong’s digital banks target wealth management expansion

[WORLD] After five years of building strong deposit bases, Hong Kong’s eight virtual banks are preparing to broaden their reach into the wealth...

Finance World
Image Credits: Unsplash
FinanceMay 2, 2025 at 4:30:00 PM

AI deepfakes threaten bank security

[WORLD] A new wave of financial fraud is sweeping across the globe, leveraging artificial intelligence (AI) to create eerily realistic deepfakes that are...

Finance World
Image Credits: Unsplash
FinanceMay 2, 2025 at 10:30:00 AM

Hong Kong stocks rally on trade and tech optimism

[WORLD] Hong Kong’s stock market rallied on Friday, propelled by renewed optimism over potential US-China trade talks and a powerful surge in US...

Ad Banner
Advertisement by Open Privilege
Load More
Ad Banner
Advertisement by Open Privilege