Banks Are Losing Money on Unpaid Debt — Why Loans Are Getting Harder to Get

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Banks losing money on unpaid debt is not just a headline. JPMorgan Chase and Bank of America wrote off roughly $4.5 billion in unrecoverable debt in the first quarter of 2024, and a lot of it came from credit cards people simply stopped paying. When banks take losses like that, they tighten lending standards. That matters to you if your debt payoff plan depends on getting approved for something.

In this video I walk through what's happening at the big banks, why it changes your options, and why the right move is to start attacking your debt now instead of waiting for a loan that may never get approved.

What you'll learn

• Why the big banks took billions in losses on unpaid consumer debt
• What "tightening lending standards" actually means for your approval odds
• Why a lower credit score today can close off options you planned to use
• What stagflation is and why it points to rates staying higher
• Why banks and the government aren't going to fix your finances for you

The banks took real losses

In the first quarter of 2024 — January, February and March — JPMorgan Chase and Bank of America reported about $4.5 billion in losses from unrecoverable debt. This wasn't trading losses or bond losses. This was money they lent out, mostly on credit cards, that people are not paying back. Not 30 days late, not 60, not 90 — not paying at all. The reason given is the obvious one: interest rates are high and inflation is hitting everything, so people are struggling to cover basic bills.

That's on top of the unrealized bond losses that have been piling up. Bank of America had roughly $130 billion in unrealized losses at one point, JPMorgan around $40 billion, Wells Fargo around $40 billion. The point isn't to panic about the banks. The point is that this isn't just happening to you.

Why bank losses become your problem

It's easy to think, "Good, I don't like the banks anyway." But when banks take losses, they tighten lending standards. Loans get harder to get and rates go up. Businesses have a harder time borrowing, which shows up as layoffs.

Here's the direct hit. Say you have three credit cards at $5,000 each at 23%. The classic move is a consolidation loan — borrow $15,000 at 12% or 14%, pay off the cards, and now you have a fixed payment at a lower rate. That usually works. But if you've been waiting, missing payments and watching your score slip, you call the bank and they say: we've tightened standards, we're not lending at your score anymore. It may not even be that your score dropped much. The bar moved.

I have a video with seven different methods to get out of debt. The problem with waiting is that you don't get to pick your favorite method later — some of them, like unsecured personal loans, may not be available to you at all, or only at rates that don't help.

Stagflation and what's ahead

I don't know what the Fed will do. Personally I don't think they're cutting, and they may raise. We're in what they call stagflation: unemployment going up, inflation going up, GDP going down. All the numbers we care about moving the wrong direction. That doesn't mean borrowing gets easier anytime soon.

Banks don't care about you

JPMorgan was fined $348 million in 2024 over gaps in trading venue oversight. Think about speeding on your commute. You speed every day for three years — hundreds of times — and you get one ticket. When a bank gets a fine that size, they got caught once. The lesson isn't about that specific bank. It's that banks are businesses trying to make money, and the government wants tax dollars or prints more money, which eats the value of yours. Nobody is coming to fix this for you.

Key steps

1. Stop assuming a consolidation loan will be there later — check what you'd actually qualify for today.
2. Protect your credit score by keeping every minimum payment current, even while you plan.
3. List every debt with its balance, rate and minimum payment.
4. Pick a payoff method you can run with the money you already have, not one that requires approval.
5. Run the numbers in a credit card payoff calculator so you can see a real payoff date.
6. Cut expenses temporarily and throw the difference at the highest-rate debt.
7. Start now. Don't put your head in the sand and wait for conditions to improve.

FAQ

Does a bank losing money mean my credit card will be closed?

Not necessarily, but tighter lending standards can mean lower limits, higher rates on new borrowing and tougher approvals. The safer assumption is that credit will be harder to get, not easier, so build a plan that works without new borrowing.

If I can't get a consolidation loan, what's left?

Plenty. The snowball and avalanche methods require no approval at all — just your existing payments plus whatever extra you can free up. You can also look at a 0% balance transfer or a car refinance if you still qualify.

Should I wait for rates to come down before refinancing?

I wouldn't build a plan on it. With stagflation conditions, rates may stay high or go higher, and every month you wait is another month of 23% interest. Start paying down what you owe now; refinance later if a better rate shows up.

Why are banks losing money on credit card debt?

In the first quarter of 2024, JPMorgan Chase and Bank of America reported about $4.5 billion in losses from unrecoverable debt, mostly on credit cards. These are people not paying at all, not 30, 60 or 90 days late. The reason given is high interest rates and inflation, so people are struggling to cover basic bills.

What does tightening lending standards mean for my loan approval?

It means loans get harder to get and rates go up. In the video I use three credit cards at $5,000 each at 23%. The classic move is a $15,000 consolidation loan at 12% or 14%. But if your score has slipped, the bank may say it no longer lends at your score. Your score may not have dropped much. The bar moved.