This Could Be Bad: Credit Card Delinquencies Are At Record Highs For Smaller Banks

This Could Be Bad: Credit Card Delinquencies Are At Record Highs For Smaller Banks
Paul Allison, CFA

3 months ago1 min

Credit card delinquencies – that’s people more than a month late paying their credit card bills – are at a record high (blue line) for small banks in the US, closing in on 8%. And even at the height of the 2008-09 financial crisis, delinquencies weren’t as high.

Mind you, things don’t look as bad for the biggest 100 banks (red line), but the trend isn’t pretty there, either.

What does this mean?

It’s probably not time to panic just yet. Since the financial crisis, lending standards have tightened a lot for the big banks that fall under the full glare of financial regulators – and that’s probably why their delinquencies remain relatively low. There’s also the fact that big banks have taken a chunkier share of loans and deposits in the US since the financial crisis. In fact, they took on even more after this year’s mini bank crisis. So even if delinquencies rise for smaller banks, those stresses are unlikely to spill over into the wider economy.

But this does suggest that either small banks have been gung-ho and lending to any Tom, Dick, and Harry (which seems a bit unlikely) or there’s something else going on. Nordstrom recently told analysts that delinquencies are up for the upscale department store’s credit cards and back above pre-pandemic levels.

For now, I’d keep a close eye on delinquencies at the big banks. If they creep up toward 4%, it may be time to worry. In the meantime, tread cautiously onward.



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