Credit Card Balances Return to Pre-Pandemic Levels

Credit card balances have returned to pre-pandemic levels, hitting $916.3 in September, according to a recent report by Equifax, one of the three national credit reporting agencies. Credit card debt levels fell significantly during the height of the coronavirus pandemic in 2020 and 2021 as consumers pulled back spending. But record issuance in 2022 has pushed balances to nearly $1 trillion.

Americans Are Spending Again in Spite of Recession Fears

The coronavirus pandemic had a major ripple effect for the U.S. economy, resulting in consumers cutting their spending significantly. By April 2021, credit card balances hit a pandemic-era low of $747.5 billion. In September 2022, the figure hit $916.3 billion, a 22.5% increase from that low.

One factor in rising debt levels is a significant increase in new credit card issuance—the number of outstanding credit cards increased by 4.6% since the same time last year. In the first seven months of the year alone, banks issued 47 million credit cards, an increase of 17% from the previous year.

Another may be 40-year highs in inflation in 2022. If economic conditions continue to worsen and the country experiences a full-blown recession, it could spell trouble for credit card issuers and their customers.

The number of accounts that are past due by 60 days or more reached 1.80% in September, up nearly 36% a year ago. That figure is still below the pre-pandemic delinquency rate, but card issuers expect it to keep rising. In Capital One’s third-quarter earnings statement, in which the bank reported lower-than-expected earnings, its credit loss provision increased to $1.67 billion, up $584 million from the previous quarter and $1.328 billion from the third quarter of 2021.

In response, many card issuers have tightened underwriting, particularly for consumers who are more financially vulnerable during recessions. According to Discover chief executive Roger Hochschild, that includes consumers on the lower end of prime credit.

Overall, however, banks will continue to grow their credit card businesses, albeit with a little more caution.