If there was one thing we all knew from the last holiday shopping season, it’s that credit was getting a serious workout. With credit card use on the rise and the growth of buy-now-pay-later (BNPL) to factor in, it was clearly a credit kind of Christmas. Reports suggest that delinquency rates are on the rise, a development that’s leaving credit card stocks in a mixed situation. The two major names, Mastercard (NYSE:MA) and Visa (NYSE:V), are both up fractionally, while two of the smaller competitors, Discover Financial Services (NYSE:DFS) and American Express (NYSE:AXP), are down.
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The reports from the Federal Reserve Bank of New York stated that overall debt was up 1.2% in the fourth quarter of 2023. Moreover, growing quantities of that debt are becoming delinquent, showing that households are having a tough time paying back the debt they incurred. The fed found that both credit card and auto loans were increasingly delinquent, and they’re on their way to levels not seen since before the pandemic four years ago. Around 6.36% of the credit card debt could be classified as “serious delinquency,” meaning that it was at least 90 days overdue. For reference, the delinquency rate was 4.01% in the year-ago period.
The Tide is Rising
If that doesn’t quite sound bad enough, there’s another bit of news that adds to the troubling prognosis here: Americans’ credit card debt just passed another record, hitting $1.13 trillion. Meanwhile, all household debt—everything from credit cards to car loans—stands at $17.5 trillion, up $212 billion just in the last quarter alone. And there’s a chance that more of that debt will come up delinquent or seriously delinquent in the months ahead, as reports noted that 49% of credit card users carried balances from month to month. Only 39% did so in 2021.
Which Credit Card Stock Is a Good Buy Right Now?
Turning to Wall Street, the leader in the sector is MA stock, a Strong Buy with an average price target of $510.07 per share that offers an 11.13% upside potential. Meanwhile, the laggard is AXP stock, a Moderate Buy that can only offer 0.39% upside potential against its average price target of $205.55 per share.
