Credit Card Losses Surge to 4.93% by 2025: Fastest Increase Since 2008 Recession
Goldman Sachs forecasts credit card losses to escalate sharply, potentially reaching nearly 5% by early 2025 amid record U.S. consumer debt growth.
As U.S. consumers continue to accumulate record levels of credit card debt and loans, credit card losses for issuers are climbing at an unprecedented rate. According to Goldman Sachs analysts, this upward trend is expected to persist through late 2024 and into early 2025.
Key Insights
- Credit card losses have risen to 3.63%, up 1.5 percentage points since September 2021.
- Loss rates could peak near 4.93% by late 2024 or early 2025.
- This rapid increase in losses is unusual outside of an economic recession.
Goldman Sachs reports that the current rise in credit card losses is the fastest seen in nearly 30 years, excluding the Global Financial Crisis of 2008. Ryan Nash, a Goldman Sachs analyst, notes that such a spike outside of a recessionary period is rare.
Historically, three out of the last five credit card loss cycles coincided with recessions, including the early 1990s, early 2000s, and the 2008 Great Recession. The other two cycles occurred in the mid-1990s and from 2015 to 2019.
Nash compares the current cycle to the late 1990s and the 2015-2019 period, where losses increased following strong loan growth, reflecting a similar normalization pace.
Loan growth has surged by 22% year-over-year, reversing a 13% decline from a year ago. Meanwhile, credit card debt hit a record $1 trillion in Q2 2023, according to Federal Reserve data.
Goldman Sachs anticipates the highest credit card loss rates at Capital One (COF) and Discover (DFS), with Synchrony (SYF) and American Express (AXP) also seeing rising losses into 2025.
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