The news: US credit card debt reached nearly $1 trillion in the fourth quarter, according to data from the New York Federal Reserve. Debt grew by $61 billion from the prior quarter—the biggest jump since 1999—and by a record $130 billion annually.
What fueled the jump in debt?
Why it matters: Card issuers are tracking increases in delinquency rates.
But many issuers have already started preparing for the worst—American Express and Capital One, for example, have set aside reserves in case consumers can’t pay back their loans.
The bottom line: While the increase in debt on its own isn’t a sign of immediate concern, the rise in delinquencies and charge-offs could be an early sign that some consumers are feeling financially strained. However, delinquencies and charge-off rates still haven’t exceeded pre-pandemic levels.
Issuers should keep an eye on how these two metrics progress to understand how consumers are faring. They should also maintain tighter lending standards and keep reserves to preserve their bottom lines in the long term.
Related content: Check out The Era of Uncertainty: Credit Cards report to learn about the short- and long-term challenges affecting the general-purpose credit card sector.
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.
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