By the numbers: Major US credit card issuers highlighted a consumer borrowing resurgence in their Q2 2023 earnings.

• Wells Fargo’s credit card point-of-sale (POS) volume reached $30.1 billion in Q2, up 16% year over year (YoY), versus 3% YoY growth last quarter.
• JPMorgan Chase’s combined debit and credit card sales volume grew 7% YoY to hit $424.0 billion, down from 10% last quarter.
• Citi’s branded credit card volume jumped 8% YoY to $2.352 billion, accelerating slightly from 7% in Q1.

But deposits continued their monthslong decline: Average deposits at Wells Fargo and JPMorgan fell 7% and 6%, respectively. Citi’s deposits were flat, buoyed by a rise in institutional deposits.

Whispers of optimism: Rising card borrowing could be a sign of consumer confidence.

• Inflation is inching downward. The consumer price index rose 3% from a year ago, down a full percentage point from May and the lowest level since March 2021.
• And the job market reflects a healthy economy: The US added 209,000 jobs in June, per BLS, and the unemployment rate sits at 3.6%.
• July consumer sentiment jumped 12.7% month over month and 41.0% YoY, per the University of Michigan Survey of Consumers—the highest reading in nearly two years.

What to watch out for: Despite positive signals from spending, we’re not out of the woods yet.

• Consumer debt levels are at a record high, with credit card debt hovering near $1 trillion.
• And credit card interest rates are also higher than ever: The average rate is 24.52% as of July 10, according to Forbes Advisor.

The record debt paired with high interest rates could spell trouble for rising delinquencies.

• JPMorgan’s 30+ day delinquency rate for card services was 1.70% in Q2 2023, compared to 1.05% a year ago.
• And Wells Fargo’s 30+ day delinquency rate was 2.26% in Q2, up from 1.58% last year.

This slow growth rate isn’t yet concerning for issuers, but if the economy worsens, it could lead to trouble down the road.

The big takeaway: While the US has thus far avoided a recession, very real threats could alter spending patterns and loan risks in the future.

A recession would put more than $200 billion in credit card revenues at risk, so issuers must take steps to ensure they can weather the potential storm.

Dig deeper: For more on potential risks for issuers in the current economy, read our report Credit Card Risks in a Darkening Economy.

This article originally appeared in Insider Intelligence's Payments Innovation Briefing—a daily recap of top stories reshaping the payments industry. Subscribe to have more hard-hitting takeaways delivered to your inbox daily.

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