Extra Credit (Hunter Field Editor’s Note)

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A recent financial trend hasn’t alarmed me yet, but it does have my attention.

The Federal Reserve reported last month that Americans’ revolving credit card balances have crept to their highest levels in more than a decade. The percentage of consumers making minimum payments on those balances has also increased.

Several national banks backed up the Fed’s report.

JPMorgan Chase, the largest bank in the country, said in its latest quarterly filing that it was seeing higher revolving credit card balances.

Capital One reported a larger share of its customers were making minimum payments on their credit cards. Even more interesting, the institution said it was seeing this trend across the board. “We’re seeing this minimum-payment effect across this credit spectrum. I’m not making a point here about the low end of the market or even about subprime,” CEO Richard Fairbank said in last month’s earnings call.

A very cursory review of Arkansas banks’ call reports and data suggests to me that many of those that offer credit cards here are seeing similar trends, with a few notable exceptions. I noticed across several local banks that the percentage of credit card accounts that were delinquent has inched up.

The drivers seem pretty straightforward to me. Economic pressures — mainly inflation and high interest rates — have squeezed many consumers. Card issuers are also starting to feel the effects of relaxed underwriting during the pandemic.

There’s a time when this would have bothered me a lot more, but consumer debt helped us come out of the last few years of a pandemic and economic hardship without a recession.

Banks are enjoying the nice spread that credit card rates offer. (The Fed last year reported the average interest rate on a credit card in the U.S. was 21%.) And consumer spending has remained strong.

But the bill will come due. Hopefully, it comes without a mass slowdown in spending or large-scale increase in credit card defaults.

There was a time when I would have called for increased regulation, but today, there is more information out there than ever on financial literacy. The Dave Ramseys of the world are all over TikTok, Instagram, YouTube, Facebook and other social media preaching on the pitfalls of credit cards.

Yet I know there are still people out there who simply didn’t know any better when they applied for a credit card and maxed it out.

We can always do more to increase financial literacy. Arkansas is a few years into a new graduation requirement mandating students take a course that includes some personal finance curriculum. It’s less than other states that require a yearlong course strictly on personal finance.

There isn’t anything that prevents schools here from offering more of this type of coursework. Americans’ continued affinity for credit cards suggests that curriculum may be as beneficial as anything to students’ future success.

Email Hunter Field, editor of Arkansas Business, at hfield@abpg.com