Customers Ready to Increase Credit Card Borrowing

After a period of poor loan demand, lenders say Americans have paid off the balances piled up during the COVID-19 pandemic and are ready to start borrowing larger amounts again.

Credit card lenders observed signs that the heavy burden on depositors is loosening due to the help of debt forbearance programs and government stimulus payments. After a period of tepid loan demand, banks are now looking forward to lending money and finally making a profit.

“While the payment rate is still very elevated, it's come down from the highs, and revolving balances have stabilized. And when we look inside our data, we see evidence of excess deposits starting to normalize in segments of the population that traditionally revolve. So, as a result, we're optimistic about the growth prospects of revolving card balances,” said JPMorgan Chase’s chief financial officer, Jeremy Barnum, during an earnings call this month.

JPMorgan Chase predicts faster loan growth in the future as their credit card users who used to take loans before the pandemic are now drawing down their savings faster than other clients. 

Synchrony and Discover, which focus on credit cards for lower credit-score customers, also noticed a positive change. Bank of America reported a similar trend, with a slightly increased number of customers carrying balances on their credit cards.

Even though all of the lenders expect payment rates to continue declining, it will probably take more than a year for the rates to go back to where they were before the pandemic. Another noticeable trend is a marketing war among card lenders. The banks are currently falling over themselves to offer rewards and promotional offers in an attempt to attract customers.

Finally, after a pandemic-induced collapse of demand for balance transfer offers and personal loans for consolidating debts, customers are again back to trying to ease their debt burdens by making use of these offers.