According to a bank report, credit card balances among small businesses that use Bank of America services have increased and surpassed 2019 levels in some categories. As of October, businesses with annual revenue between $1 million and $5 million had average credit card balances 18% higher than the 2019 average. In contrast, small businesses with revenue under $100,000 have credit card balances only 4% higher than 2019 levels. Automated clearing house payments for small businesses rose 7% year-over-year in October, with the health services and construction sectors experiencing the greatest growth in small business payments.
Bank of America attributes the rise in small business credit card balances to increased spending in 2021 and the first half of 2022. Despite credit card spending remaining relatively stable over the last year, balances have continued to grow. However, when adjusted for inflation, the report found that credit card balances are still below pre-pandemic levels for all categories of small businesses. The report suggests that more small businesses will use credit cards as a source of financing in 2022, with an increasing portion of balances carrying interest.
While small business credit card balances are on the rise, overall credit card balances have been increasing as well. Thirty-day credit card delinquencies rose to 4.03% month-over-month in October. A November report from the Federal Reserve Bank of New York's Center for Microeconomic Data indicated that millennial credit card delinquency rates surpassed pre-pandemic levels in the third quarter of 2023, reaching 2.9% compared to 2.5% in Q3 2019. However, delinquency rates for Gen Z, Gen X, and baby boomers remain in line with pre-pandemic levels.
As small business credit card balances continue to rise, Visa, a major card network, has been focusing on the current and next generations of entrepreneurs. A recent Visa survey revealed that 76% of Gen Alpha respondents aged 8 to 14 aspire to run their own businesses. Visa announced plans to hire its first junior chief innovation officer to work on projects related to payments technology innovation.
Additionally, Visa unveiled a $100 million pledge to support underserved small and mid-sized businesses within the Asia-Pacific Economic Cooperation economies over the next five years. The initiative includes providing financial training and information, introducing digital payment methods, and supporting businesses with modern technology.
