Banks are bracing for consumers to stop paying off their credit cards, delinquency rates hit 12-year high
Banks are bracing for consumers to stop paying off their credit cards, delinquency rates hit 12-year high
Provisions for credit losses rose at JPMorgan, Citi, Wells Fargo, and Bank of America last quarter
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Bracing? Wont they make huge profit on the absurdly high interest?
Of course some may default, but its extra profit from the others.
Its profit in the long run yes. But in short term extra people accumulating debt means less cash floating around the bank to put into other investments.
This can be an actual problem if it someone goes to withdraw their balance and the bank literally doesn't have money becuse too many of their credit users spent the banks cash.
Nah, that's what the federal reserve is for.
Banks also need to hold on to cash if you have a massive credit line, even if it's not used, because they need to be ready to use it. So banks already have reserves to handle increases in demand, and they can close some dormant accounts to free up cash if needed. For example, I have something like $100k in total credit limit across a dozen or so cards, get I only use like $4-5k at a time and pay mine off every month. So I'm taking a disproportionate share of the total credit limit, so banks want to close my cards (and they have closed like 2 in the past year due to lack of use).