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Credit Card Delinquency Rates Rise in January

Last updated on April 21st, 2022

More and more consumers are falling behind on their credit card payments. January’s credit card metrics indicate that consumer spending habits are gradually returning to a pre-pandemic level, and inflation begins to take hold of U.S. consumer finances. Despite this, banks are prioritizing rewards, such as 0% APR, to retain customers in the long term.

Delinquency Rates Rise As Spending Reaches Pre-Pandemic Levels

According to analyst John Hecht of the Jefferies Group, an independent investment bank, and financial services company, a return to “normal” consumer spending and repayment habits means a slight uptick in delinquency and charge-off rates for major lenders. Hecht dubbed the rise in delinquencies an “orderly normalization in credit,” reflecting a return to more normal spending patterns following years of COVID-19 chaos.

While delinquency rates (or the rate of consumers paying their credit card bills late) remain modest, charge-off rates grow more dramatically. A charge-off is when a lender writes off an account as a loss and closes the account to future charges.

Here are the delinquency and charge off rates for the major credit card issuers, according to a recent report from Seeking Alpha:

  • American Express: 0.8% delinquency rate (up from 0.7% in December 2021)
  • Capital One: 2.4% delinquency rate (up from 2.22% in December 2021); 2.03% charge off rate (up from 1.76% in December)
  • Chase: 0.7% delinquency rate (up from 0.66% in December 2021); 1.02% charge off rate (up from 0.99% in December)
  • Citi: 0.84% delinquency rate (up from 0.81% in December 2021); 1.11% charge off rate (up from 0.97% in December)
  • Discover: 1.75% delinquency rate (up from 1.66% in December 2021); 1.76% charge off rate (up from 1.58% in December)

Issuers Prioritize Rewards to Retain Customers

An interesting facet of credit card delinquency and write-off rates is the cost associated with attracting – and retaining – cardmembers. Lenders are becoming more concerned about keeping rewards cardholders. Many experts see a trend towards slightly longer 0% intro APR periods.

Citi, Wells Fargo, Chase, and Discover all offer lengthy intro APR periods on some of their most popular credit cards, with the Chase Freedom Flex and Freedom Unlimited offering 15 months interest-free on purchases and balance transfers, the Citi Simplicity® Card and Citi® Diamond Preferred® Card both offer 21 months of 0% intro APR on balance transfers and 12 months on purchases, and the Wells Fargo Reflect offering up to 21 months with 0% interest on purchases and transfers.

In American Express’s latest earnings call, CFO Jeff Campbell said its new rewards and benefits help with long-term customer retention and growth prospects. “It does, however, mean you see more year-over-year growth in these variable customer engagement costs,” he noted. “Putting all these dynamics together, I’d expect the variable customer engagement costs overall to run at around 42% of total revenues in 2022.”

Related Article: Americans Resolve to Save Money, Build Credit in 2022

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About: Cory
Cory Santos

Cory is BestCards.com's "Jack of all trades" and resident credit expert, covering all facets of the credit card space. Cory holds academic degrees in both the U.S. and U.K. In addition to credit cards, Cory finds that jogging, cats, and memes are essential parts of a balanced day.