US Bankcards Industry Benchmarking Trends: 2024 Q2 Update
Credit card delinquencies are stabilizing in early buckets while consumers continue to spend
Halfway through 2024, the latest credit card data from FICO shows that consumer average monthly spend remains elevated and the average credit card balance continues to grow. The rate at which credit card balances are being paid back is still on the decline but the percentage of credit card accounts that have missed one payment has gone down year-over-year for the past two quarters. Here are the US Credit Card and Consumer Spending Highlights:
The on-going uncertainty in the US economy has consumers on edge and Risk Managers in a state of unrest. Inflation appears to be moving towards the Federal Reserve’s target rate of 2%, potentially leading to rate cuts by year-end, but the unemployment rate has begun to rise. This has led credit card issuers to be cautious while they monitor higher delinquency and loss rates. The data trends shared below from the FICO® Risk Benchmarking solution give us a more in-depth picture – this data represents a national sample of approximately 130 million US accounts gathered from FICO client reports generated by FICO® TRIAD® Customer Manager and Adaptive Control System solutions.
Credit Card Usage and Payments
The average balance on US Bankcards in June was $2,665 and has increased 1.8% year-over-year. The sustained increase since May 2022 is mostly led by more consumers paying a smaller percentage of their balance and fewer paying their balance in full. To allow customers the ability to continue spending Risk Managers should identify those that could benefit from additional credit, and maintain the ability to pay monthly, and offer credit line increase programs.
In addition to rising average balance, the percentage of cardholders that are balance active in June has also increased slightly from 51.9% in 2023 to 52.2%.
Issuers like when credit card usage rates increase, but it can act as an early warning indicator that some consumers may be getting into trouble. Another metric that should be closely monitored is credit card payment rate (the percentage of previous month’s balance that was paid back). As of June, the payment rate of 27.6% is higher than the past two months but slightly lower year-over-year. Risk Managers should be keeping an eye on the percentage of customers making only the minimum payment as well since these customers may be on the brink of not being able to pay at all. This has grown to 7.8% of active cardholders from 7.0% just one year ago.
Credit Card Delinquency Rates
Despite rising interest rates, increasing balances and lower payment rates, there is a glimmer of positive news in early-stage delinquency rates. The percentage of active accounts that have missed one payment has decreased by 0.9% since June 2023. Balances on the accounts that are one payment past due are also down slightly year-over-year from 6.6% to 6.5%.
The percentage of active accounts that have missed two payments is also flattening, having increased from 1.53% in June 2023 to 1.59% in June 2024, compared to the rate of 1.36% in June 2022. The percentage of total balance that is currently two payments past due has risen slightly more from 1.06% to 1.14% year-over-year.
While stabilization of the early-stage rates is good news, it will take time for loss rates to steady. From the low-point in April 2021, two-cycle balance rates more than doubled (from 0.47% to 1.14%) and loss rates typically trail behind by five to six months.
There are many other key performance indicators that Risk Managers should keep an eye on over the next six to twelve months – utilization and collections entry rates being two important ones. Also segmenting accounts by the time since they were booked can highlight weaknesses in the portfolio and areas where more attention may be needed. Reach out to your FICO Solution Success Advisor or FICO Key Account Managers for further discussion and assessment if you need help completing an evaluation of your portfolio.
If you are a consumer who is struggling, there are tools available at myFICO.com to help keep track of credit card usage and your FICO Score.
Please leave a comment on this post if you have any further questions.
How FICO Can Help You Manage Credit Card Risk and Performance:
Explore our solutions for customer management.
See my previous posts on US card performance.
Consumers who are struggling can find tools at myFICO.com to help keep track of their credit usage and FICO Score.
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