Record card adoption in the past year, increased spending, and the economy has pushed card balances to $916 Billion last month. During the height of the COVID Pandemic in 2020-2021 consumers pulled back on spending and debt levels fell significantly, but in the past year with record credit card issuance, the rising costs of goods and services, inflation and the rush to get back life back to normal, consumers have been increasingly spending more and adding more debt to credit cards,. Credit cards companies have incentivized new signups through better bonuses and less stringent underwriting standards. In the first seven months of the year alone, banks issued 47 million credit cards, an increase of 17% from the previous year. This rapid rise in credit card debt levels could result in increased losses for the credit card companies. The number of accounts that are past due 60 days or more reached 1.80% in September, up nearly 36% a year ago. It’s below pre-pandemic delinquency rate, but credit card companies expect it to keep rising. Th response from credit card companies are tightening underwriting, but that may be a little too late. Despite the looming fear of a recession that is already here in many aspects, consumers continue to spend, and the Federal Reserve is using the only tool they have to slow down the economy - Raising interest rates in hope to slow the economy without tipping the economy into a deeper recession. Most economist foresee a recession that will last way into the end of next year. This is a time to look for ways to save money on operational costs and for small businesses to control spending. As always, we are here to help your business navigate through good and not so good economic times.
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