When the biggest U.S. banks drop their quarterly numbers, the conversation usually centers on net interest margins, trading desks, and investment banking pipelines. But if you listen past the earnings-call formalities, there’s a more immediate story unfolding—one about how American households are coping with stubborn inflation and the highest interest rates in more than twenty years. The latest filings from JPMorgan Chase, Bank of America, Citigroup, and Wells Fargo offer a close-up view of consumer balance sheets, and the picture isn’t the same for everyone.
Nina Quintos here, cutting through the quarterly noise. The data shows a consumer who is still spending but being choosier, still borrowing but paying a lot more for the privilege, and still employed but starting to show faint stress fractures in credit performance. This isn’t a panic story. It’s a numbers-based look at where the pressure is building and where the buffers are holding.
Spending Growth Is Cooling, Not Cratering
Combined debit and credit card purchase volumes at the four largest U.S. retail banks grew somewhere between 3% and 5% year-over-year in the first quarter. That’s a step down from the 7% to 9% pace we saw in early 2023. JPMorgan’s combined card volume rose 4%, while Bank of America’s total payments growth eased to 3%. The slowdown is broad, but it’s not a collapse. People are still swiping—they’re just getting pickier about where and on what.
The real story is the split by income. Bank of America’s CEO Brian Moynihan pointed out that lower-income households—those with average balances under $2,000—are spending at roughly the same dollar level as a year ago. Adjust for inflation, and that’s a real contraction. Middle- and higher-income groups are still spending more, but their growth rate has been cut in half. This two-track pattern matches what we see in broader retail data: services spending is resilient, goods spending is softening, and the bottom income quintile feels the pinch first.
Deposit Cushions Are Getting Thinner
Consumer deposit balances tell a parallel story. At JPMorgan, median checking balances for lower-income customers have dropped 30% from their pandemic peak and now sit below pre-pandemic levels. Wells Fargo reported a similar trend: consumer deposits fell 4% year-over-year, with the sharpest declines in mass-market accounts. The excess savings that powered the 2021–2022 spending spree? For the bottom 40% of households, it’s mostly gone.
Higher-income cohorts still have fatter accounts than they did in 2019, but the direction is unmistakably downward. Bank of America’s average consumer checking balances shrank 6% year-over-year. This isn’t a cliff-edge moment, but it’s a clear sign that the cushion insulating many families from rate hikes is wearing thin. When deposits shrink and credit card balances swell at the same time, the margin for error gets uncomfortably narrow.
Credit Card Balances and Delinquencies: Where the Stress Shows Up
If you want one number that captures consumer strain, watch credit card delinquency rates. Across the four big card issuers, 30+ day delinquencies ticked up in the first quarter. JPMorgan’s card net charge-off rate rose to 2.1%, from 1.6% a year earlier. Bank of America’s consumer card net charge-off rate climbed to 2.2%, compared with 1.7% in the same quarter last year. Citigroup’s U.S. branded cards hit a 2.5% net loss rate, and Wells Fargo’s consumer card net charge-offs reached 2.7%.
None of these figures scream crisis. Before the pandemic, charge-off rates of 3% to 4% were perfectly normal. But the direction and speed are what matter. A year-over-year jump of 50 to 80 basis points across major issuers is the fastest normalization we’ve seen since the Great Recession. It tells you the tailwind from stimulus-era savings and payment holidays has fully faded, and we’re now looking at the underlying credit trend.
Notably, banks aren’t slamming on the brakes yet. JPMorgan CFO Jeremy Barnum said the firm is “not seeing anything that would cause us to change our underwriting posture materially.” Translation: the deterioration is within expected bounds and baked into their models. But if the current pace holds through year-end, loss rates could push past 3%—a level that historically makes lenders more defensive.
What a Rate Hold Means for Card Borrowers
The Federal Reserve’s decision to keep rates steady leaves the average credit card APR above 20%. For households carrying revolving balances, that’s a direct hit to disposable income. As we covered in What a Rate Hold Actually Means for Credit Card Borrowers, even a pause doesn’t ease the pressure; it just stops it from getting worse. The cumulative weight of 500 basis points of tightening is still working its way through family budgets.
Auto Loans: The Quiet Stressor
Auto loan performance is deteriorating faster than credit cards, though it gets less airtime because the market is smaller and more scattered. Wells Fargo’s auto portfolio saw net charge-offs rise to 1.15%, up from 0.65% a year ago. Ally Financial, a decent proxy for auto credit, reported a 1.85% net charge-off rate in its retail auto book, with 30-day delinquencies climbing to 3.58%. Subprime auto delinquencies are now above 2019 levels, and recovery rates on repossessed vehicles are slipping as used-car prices settle back to earth.
This matters because auto loans are often the last bill a household skips before mortgage or rent. Rising auto delinquencies suggest a segment of consumers is already making hard choices. The average monthly payment on a new car loan now tops $730; for used cars, it’s above $530. Throw in insurance premiums that are up 20% year-over-year, and the total cost of owning a vehicle is squeezing budgets at the lower end of the credit spectrum.
Mortgage and Housing: A Split Screen
Mortgage performance still looks almost flawless by historical standards. Early-stage delinquencies are near record lows, and loss rates are tiny. But that glosses over a deep divide. Existing homeowners sitting on sub-4% fixed-rate mortgages are largely shielded from rate hikes. Their housing costs are stable, and many have watched their home equity grow. The strain is concentrated among renters and recent buyers who financed at 6.5% or higher.
Bank earnings don’t directly capture rental stress, but the indirect clues are piling up. Wells Fargo’s home lending originations fell 38% year-over-year, reflecting both weaker demand and tighter credit. JPMorgan’s mortgage banking revenue dropped 20%. The housing market is effectively frozen for anyone without cash or a very strong credit profile. That pushes more demand into rentals, where rents have climbed 20%+ cumulatively since 2020. The consumer stress showing up in credit card and auto data is partly a spillover from housing affordability pressures.
Bank Provisions: What They’re Telling Us About the Road Ahead
Provisioning for credit losses is a forward-looking gauge. Banks build reserves based on macroeconomic forecasts and what they’re seeing in their own portfolios. In the first quarter, JPMorgan added $1.9 billion to its credit reserves, up from $1.1 billion a year ago. Bank of America’s provision rose to $1.3 billion from $900 million. Citigroup’s total provisions for credit losses reached $2.2 billion, driven by cards and retail banking. Wells Fargo’s provision was $938 million, down a touch from a year ago but still elevated compared with pre-pandemic norms.
The reserve build isn’t dramatic, but it’s steady. Banks are bracing for a mild deterioration, not a sharp downturn. The baseline economic scenario most models assume has unemployment rising modestly to around 4.5% by year-end, from today’s 3.8%. If the labor market weakens faster, those reserves will look thin. For now, the signal is: we see stress accumulating, but we don’t see a breaking point.
Labor Market: The Thing Everything Else Rests On
Everything in consumer credit depends on employment. Charge-off rates can grind higher as long as job growth stays positive and wages outpace inflation. The danger is a nonlinear shift—a sudden wave of layoffs that turns a gradual climb in delinquencies into a spike. Bank CEOs were cautiously optimistic here. JPMorgan’s Jamie Dimon noted that “consumers are still spending and have jobs,” but he repeated his warning about sticky inflationary pressures and geopolitical risks.
Wage growth for lower-income workers has cooled from 6%+ in 2022 to around 4% now. That still beats inflation, but it leaves less room to service debt. If wage growth slows further while APRs stay above 20%, the math gets brutal. The current data points to a slow-squeeze scenario, not a sudden shock. But slow squeezes can be sneaky—they chip away at resilience bit by bit until a relatively small disruption triggers an outsized reaction.
What the Data Means for Investors and Households
For investors, the bank earnings paint a consumer sector that isn’t breaking but is definitely bending. Credit metrics are normalizing from unsustainably low levels, not spiraling out of control. The things to watch over the next two quarters: the speed of delinquency increases, the path of deposit balances, and any shift in bank underwriting language. If provisions jump 30%+ in Q2, that would signal a change in banks’ internal forecasts.
For households, the takeaway is more immediate. The era of cheap floating-rate debt is over, and it’s not coming back anytime soon. Credit card balances are at record nominal levels, and the average APR is north of 20%. Paying down revolving debt is the single highest-return financial move most households can make right now. The interest savings are guaranteed and tax-free. Refinancing auto loans or trading down to a less expensive vehicle can also free up meaningful cash flow.
Bank earnings don’t just tell us how the banks are doing. They’re a quarterly pulse-check on the American consumer. The current pulse is elevated but steady. The question is whether it stays that way through the back half of the year.
Frequently Asked Questions
What do rising credit card charge-offs actually mean for the average consumer?
Rising charge-offs mean more borrowers are falling far enough behind that banks write off the debt as uncollectible. For the average consumer, it’s a warning that household budgets are under growing strain. It doesn’t directly hit those who pay in full each month, but over time it can lead to tighter lending standards and higher interest rates on new credit offers.
Why are auto loan delinquencies rising faster than credit card delinquencies?
Auto loans are bigger fixed monthly obligations, and unlike credit cards, you can’t easily shrink the payment by spending less. When budgets get tight, people often prioritize credit card minimums over the car payment because the immediate consequence of missing a car payment—repossession—is harsher. The rise in auto delinquencies suggests a subset of borrowers is already stretched beyond their ability to cover all their bills.
How should I interpret the banks’ increased provisions for credit losses?
Provisions are funds banks set aside to cover expected future loan losses. An increase means banks expect more borrowers to default in the coming quarters. It’s a forward-looking metric based on economic forecasts and current portfolio trends. Rising provisions signal caution, but the current levels suggest banks expect a gradual deterioration, not a sudden crisis.
Are consumers with high credit scores also showing signs of stress?
So far, stress is concentrated in lower-income and subprime segments. Prime and super-prime borrowers continue to perform well, with low delinquency rates and stable spending patterns. That said, even among higher-income cohorts, deposit balances are declining and spending growth is slowing, which suggests the cumulative effect of inflation is eroding buffers across the spectrum—just at different speeds.
