Credit card debt boosts banking

Increased interest rates and fees driving record profits for industry.

Americans have accumulated near-record levels of credit card debt over the past year as card companies have increased interest rates and fees.

The booming market is helping drive record banking industry profits but could become increasingly costly for consumers who don’t pay off their bill every month or miss a payment, industry experts say.

JPMorgan Chase, the country’s largest bank by assets, and Citigroup reported credit card sales were up 10% and 5% respectively in the third quarter. Profits at Visa were up 17% in its most recent fiscal year, while Mastercard reported an 11% profit jump in its most recent quarter.

“People like their credit cards. They use their credit cards far more than they use their debit cards,” Jamie Dimon, chief executive of JPMorgan Chase, said in July. “I don’t remember the last time I used my debit card.”

To be sure, despite increasing debt loads, delinquency rates remain relatively low. About 6% of consumers were late on a payment this year compared with 15% in 2009, according to WalletHub. And consumers have yet to balk at the relatively high interest rates, industry experts say.

Credit card debt as a share of disposable income has been flat for the past six years, and many consumers pay off their bill every month, the American Bankers Association said in a November report. “Consumers appear to be well-positioned to meet their financial obligations in the months ahead,” Dan Smith of ABA said in a statement.

The industry has thrived despite the 2010 Credit Card Accountability, Responsibility and Disclosure (CARD) Act, sweeping legislation that, among other things, limited the number of fees consumers could be charged. But card companies are again facing scrutiny from Democrats on

Capitol Hill. Sen. Bernie Sanders, I-Vt., who is running for the Democratic nomination for president, and Rep. Alexandria Ocasio-Cortez, D-N.Y., introduced legislation earlier this year to cap credit card interest rates at 15%, a steep reduction from current levels.

The proposal met immediate resistance from the banking industry, which brought in $113 billion in interest and fees from credit cards last year, up 35% since 2012, according to S&P Global Market Intelligence.

‘Consumers appear to be wellpositioned to meet their financial obligations in the months ahead.’

Dan Smith American Bankers Association