Why are the largest credit card companies stashing funds? Have they sensed something? Is a downturn coming?

While Americans continue spending and swiping their credit cards at a good rate, some of the country's largest banks are quietly positioning themselves for more turbulent times that might be coming ahead, as per a report.

Americans Keep Spending, But Banks Are Playing It Safe

Since US president Donald Trump's tariff war started, the stock market has been volatile, but the effect has not yet appeared in the largest banks' quarterly financial reports, according to Fortune.

As per Fortune, the financial performance of credit card companies were strong this quarter because consumers borrowed, spent, and opened credit cards, even more than last year.


JPMorgan Chase revealed that credit and debit card spending rose 7% compared to the same period last year, but the bank also highlighted that people were carrying elevated credit card balances, according to the Fortune report.

Even Bank of America reported that spending increased by 4% from last year, as per the report. The bank said that fewer customers missed loan payments during the quarter, according to Fortune.

However, even after a positive growth this quarter, top credit card companies are preparing for an economic downturn and delinquencies are already rising to their highest level in five years, reported Fortune.

Citigroup’s chief financial officer Mark Mason, highlighted that, “The consumer continues to be resilient and discerning in their spend,” and emphasized that, “We’ve seen a shift towards essentials and away from travel and entertainment,” quoted Fortune.

Recession Worries Are Fueling Massive Cash Reserves

While, JPMorgan Chase finance chief Jeremy Barnum said, “The focus right now is on the future, which is obviously unusually uncertain,” as quoted in the report.

JPMorgan Chase now predicts a 60% probability of a recession and is adding to its financial buffer in case it happens, as per the report. The bank put almost $1 billion into its reserve fund for future credit losses—totalling $27.6 billion, reported Fortune. That reserve serves as a buffer, providing protection for losses when customers can't repay their credit cards or loans, as per the report.

JPMorgan also reserved $3.3 billion for loans it anticipates may not be paid back, a sharp 73% increase from the $1.9 billion it reserved for the same reason last year, according to Fortune. The bank also maintains $1.5 trillion in cash and marketable securities, reported Fortune.

At the same time, Citigroup also bank increased its cost of credit by more than 15% from last year to $2.7 billion, as per the report. The bank also upped its overall reserves by $1 billion in the first quarter alone, now holding $22.8 billion as a buffer against financial losses, according to the report. Like JPMorgan, Citi is sitting on a good cash cushion, with about $960 billion, ready to weather any economic storms, as per Fortune.

FAQs

Are people still spending money?
Yes, Americans are still spending and using their credit cards more than last year.

Are delinquencies going up?
Yes, they're now at their highest level in five years.