There's been a significant increase in the charge-off rate on credit card loans across all U.S. banks, since January 2022. This makes sense, given the overall increase in the amount of revolving debt outstanding (see Chart below, "US Commercial Banks Consumer Loans: Credit Cards") and the festering impact from the price level increases as seen in the Consumer Price Index for All Urban Consumers (CPI-AUCSL).
The accompanying chart (below) illustrates the dramatic increase in net charge-offs (i.e., the amount of net loss after loan default recoveries) relative to overall credit card debt increases and credit card accounts delinquency. This is not a comforting statistic for the U.S. economy or banking system.
We have to wonder when this could impact consumer behavior, as this trend is not sustainable. At some point, banks would have to tighten their lending standards, resulting in less money available to consumers (both businesses and households). Historically, tighter lending standards have had a direct impact on the ability for many companies (especially discretionary goods/services) to sustain top-line revenues. Protracted lower revenues could lead to mass layoffs as CFOs seek to maintain profit margin, or earnings per share (EPS), stability which solely benefits their shareholders' experience.
