Small credit card issuers are facing a significant challenge in today’s economic environment as charge-off rates rise across the industry. Unlike larger, well-capitalized institutions, smaller issuers often have less flexibility in managing credit risk, which can make even a slight uptick in charge-offs more impactful to their bottom lines. As charge-offs continue to climb, understanding these dynamics is crucial for smaller players aiming to stay competitive in a turbulent market.
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Data for today’s episode is provided by Javelin Strategy & Research’s Report: Credit Card Issuance by Small Issuers: Strategies, Risks, and Options
Credit Card Charge-offs as a Percentage of Receivables for Small Issuers
- Q4 2020 – 5.68%
- Q4 2021 – 4.51%
- Q4 2022 – 6.95%
- Q4 2023 – 9.5%
Source: Federal Reserve Bank, Javelin Strategy & Research estimates, 2024
About Report
In today’s financial landscape, payment cards have become essential for banks, credit unions, and financial institutions of all sizes to remain competitive. With nearly 600 million credit cards circulating in the U.S. and over 230 million adults using them, credit cards are a primary method of household lending. However, smaller banks and credit unions face substantial competition from major institutions that dominate the credit market. To bridge this gap, some smaller financial entities are turning to agent bank partnerships, which allow them to offer credit programs without bearing the full operational load.
This report by Javelin Strategy & Research provides an in-depth analysis of the credit card market, segmented by institution size, assets, and deposit levels. It also highlights the performance disparities among institutions and examines the agent bank model as a strategic option to support credit offerings for smaller banks and credit unions.