It’s no secret that a lot of banks in the United States are constantly under pressure, due to the slow growth and very low interest rates, but things could get worse soon, as they’re facing a way bigger challenge.
According to a report from Reuters, an increasing number of U.S. citizens fall behind their credit card payments!
The issues for banks keep coming
Multiple banks and credit card companies, including Capital One and JPMorgan Chase & Co, revealed that the credit card delinquency rates for August – no matter if we’re talking about regular cards, cash back cards or travel rewards credit cards – registered a rise, for the second month after falling for four months.
Of course, these rising delinquencies will eventually result in higher loan losses for lenders.
“A noticeable rise in delinquency rates – even from very low levels – is worth paying attention to,” said Andrew Haughwout, New York’s Federal Reserve senior vice president.
As for the banks, JPMorgan, for example, announces that their delinquency rates rose to 1.16 percent in August, while in August it was at 1.15. Capital One is in the same situation, the rate growing from 3.81 in July, to 3.97 in August, while Discover Financial Services registered 2.1 in August, versus July’s 2 percent.
The rates surged during the financial crisis, though, as a lot of people lost their jobs, forcing the economy to crumple. After it was over, lenders change their policies, in order to avoid losses caused by non-performing loans.
Lenders know the situation, but keep offering loans
On the other side, lenders are now taking risks when it comes to extending loans and card, even by offering them to people with low credit scores.
“We have seen some loosening of standards on card originations: low-credit-score individuals getting credit cards or extended limits, which allow them to borrow more,” said the same Andrew Haughwout.
This whole situation could make the economy in the country to take a turn for the worse, as people who have a lot of credit card debt will find it very difficult to pay in hard times.
