Major U.S. retail banks suffered $12.5 billion losses on delinquent credit card loans

22 January 2018

According to the latest stats four major retail banks in the United States suffered about 20% increase in credit card losses. As it was noted by Charles Peabody from Compass Point, a Washington-based investment group, ability of consumers to bear the burden of their debts on credit cards is deteriorating, reports the Financial Times.

It was found that in 2017 US banks Citigroup, JPMorgan Chase, Bank of America and Wells Fargo saw total losses amounting to $12.5 billion from unpaid loans on credit cards, which is about $2 billion more as compared to the previous year.

Meantime, banks continue abundantly providing loans to consumers, even those with low credit rating, as they make high earnings on transaction fees charged to vendors and fines levied on consumers for delinquencies on their credit card interest payments. Banks get about 4% return on credit card services, while return for retail banking accounts just for 1.4%.

Brian Riley, a current director at Mercator Advisory Group, believes that efforts made by the financial institutions to attract even those consumers with low creditworthiness may be one of the reasons contributing to high losses. However, the banks do not seem very concerned about this fact with JPMorgan reserving additional $200 million for potential losses on credit card debt payments.

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