Banks Face Mountain of Plastic

Consumer credit cards have joined mortgage lending as a major troublespot for U.S. banks.

Banks with large credit card arms, including Bank of America(BAC Quote), JPMorgan Chase(JPM Quote), Washington Mutual(WM Quote) and Capital One Financial(COF Quote) say that the steadily weakening economy is causing credit card purchase volume to slow, while credit card charge-offs tick up. As a result, some banks are shoring up their exposure to credit cards by tightening lending standards and curbing loan growth.

"Whether or not we are technically in a recession, our customers are feeling significant economic pressure," Bank of America's president of global consumer and small business banking Liam McGee said Tuesday morning at the UBS Global Financial Services Conference.

"Year-over-year credit and debit purchase volume by our customer continues to show stable long-term growth, [however] we've recently seen a sharp increase in spending on necessities driven by the rise in fuel and food prices," McGee said. "At the same time we're also seeing declining growth rates in discretionary [items], such as retail, travel and entertainment."

JPMorgan Chase's chairman and CEO Jamie Dimon echoed similar thoughts on the state of the consumer during his presentation at the UBS conference on Monday. There has been "fairly constant deterioration in both consumer and small business credit," Dimon said.

BofA and JPMorgan Chase's cautionary comments this week reflect a fragile U.S. economy that has hit consumers hard by stemming the easy access to credit cards, auto loans and mortgages that was prevalent earlier in the decade. Losses on credit cards are typically higher than housing-related loans because they are unsecured loans.