Credit card charge-offs on the rise

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Some big companies reported higher credit card charge-off rates — the percentage of loans that lenders consider uncollectable — for the first quarter of 2019 as people fell behind on paying their credit card accounts. Here are a few examples:

  • Capital One: Charge-offs rose 0.4% from the fourth quarter of 2018 to 5.04%.
  • US Bank: Charge-offs rose 0.16% from the fourth quarter of 2018 to 4.04%.
  • Discover Financial Services: Charge-offs rose from the fourth quarter of 2018 to 3.5%.
  • JP Morgan Chase: Charge-offs rose 0.3% from the fourth quarter of 2018 to 3.23%.

In response to the increase in bad credit card debt, some banks might move to tighten certain lending standards. It’s not clear how card issuers will respond, but if they decide to tighten lending standards it could get tougher to be approved for credit.

Want to know more?

What’s going on with credit card payments?

First-quarter results from some credit card issuers like Capital One, US Bank, Discover and Chase are just the latest evidence that Americans could be having a difficult time staying on top of their credit card debt.

In the fourth quarter of 2018, Americans’ total credit card debt hit a record of $870 billion and the number of credit card accounts at least 90 days late on payments rose, according to a report issued in February by the New York Federal Reserve.

A Federal Reserve survey of senior loan officers at U.S. banks late last year showed that some expected 2019 to bring a slight worsening in the performance of credit card accounts — even for borrowers with good credit. This may indicate that some lenders are concerned about consumers’ ability to make payments on their credit cards.

What does this mean for you?

If you’re in the market for a new credit card this year, there may be a silver lining. The Federal Reserve recently announced it’s likely to keep interest rates steady for the rest of the year. Since Fed interest rates can influence credit card APRs, it’s possible you’ll see your interest rates remain steady.

However, if credit card issuers decide to tighten their lending standards, it could be harder to get a credit card or other loans. And if you apply for a new line of credit or loan and get approved, you might end up with a lower credit limit or higher APR than you would have.

Regardless, keep up the work on your credit before applying for credit cards. Healthy credit could help you qualify for better loan terms.