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Credit card company Discover Financial Services (DFS) reported 4Q22 earnings after the close today. DFS has a total loan portfolio of $112 billion – $90 billion of which is credit cards. When consumers start feeling financial stress, it shows up in credit cards first. People make sure to pay the mortgage and auto loan because they can’t lose the house or car. But when things get tight, they may start to carry a balance on their credit cards. And that’s exactly what DFS’s 4Q22 results show.

DFS’s net charge-off rate – money it doesn’t expect to recover – in its credit card portfolio increased to 2.37% in 4Q22 from 1.92% in 3Q22. And its 30-day delinquency rate in its credit card portfolio increased to 2.53% from 2.11%. Those are significant quarter-to-quarter increases. As a result, DFS stock is -6% in the after-hours.

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