NEW YORK—Credit card losses are surging at small banks.
As small banks have been fighting for a bigger piece of the credit-card market in search of higher returns, they are now contending with rising losses, the Wall Street Journal reports.
“Missed payments on credit cards at small banks have risen sharply over the past year, a sign that their cardholders are taking on more debt than they can handle,” the Journal stated.
Their charge-off rate hit 7.2% in the fourth quarter, up from 4.5% a year ago, according to Federal Reserve data.
“Concerns have been mounting in the broader credit-card industry about the recent trend of rising delinquencies. But they've especially surged at smaller banks, those outside the 100 largest by assets that have less than around $10.4 billion in assets. There, the average charge-off rate is near an eight-year high, while the 3.5% loss rate at large banks remains well below the 10.6% seen in 2010,” the Journal said.