JPMorgan Chase & Co.'s (JPM) credit-card unit swung to a loss of $700 million in the third quarter from a profit of $292 million a year earlier, a result that suggests hopes of a smooth turnaround in the U.S. economy are premature.

The latest earnings Wednesday from a top U.S. credit-card issuer indicate that consumers continue to struggle to find their financial footing, as joblessness remains a threat. In addition, credit-card companies could face the prospect of more borrowers falling behind on payments as strapped consumers, heading into the holiday season, increase spending on their plastic.

"Card is having a tough time," Chief Executive Jamie Dimon said of JPMorgan's credit-card business during a conference call Wednesday with investors.

The unemployment rate rose to a 26-year high of 9.8% in September.

Credit-card issuers, including Capital One Financial Corp. (COF), Bank of America Corp. (BAC), Citigroup Inc. (C), Discover Financial Services Inc. (DFS) and American Express Co. (AXP), also are coping with sweeping legislation to protect consumers that will bite into income.

To fight the losses, card issuers are scaling back on credit and getting tougher on whom they lend to. At JPMorgan, branch sales of credit cards in the third quarter were down 16% from a year ago and 18% from the prior quarter.

"Broadly speaking, you can't expect significant improvement in credit metrics given these pressures," said Sanjay Sakhrani, an analyst at Keefe, Bruyette & Woods. Sakhrani doesn't cover JPMorgan.

The $700 million net loss at JPMorgan's card-services unit was fueled by an increasing volume of souring credit-card loans and higher reserves as the financial services giant squirreled away more funds to cushion against potential future losses. Net revenue of $5.2 billion, a 33% jump from a year ago due to the acquisition of Washington Mutual and wider loan spreads, offset some red ink.

Borrowers at least a month behind on their card payments increased to 5.38% in the third quarter from 5.27% in the second quarter and 3.69% a year ago. Rising delinquencies, a key gauge of future losses, are a red flag for issuers because higher delinquencies force them to squirrel away capital to reserve for potential losses; ultimately, companies must write off loans if customers can't pay up.

JPMorgan Chase and its peers have been hurt by cutbacks in card spending, which dent the fees earned through credit-card transactions, and customers who are falling behind on their bills in the current economic slump.

JPMorgan Chase wrote off 9.41% of its card loans, including those packaged into bonds, compared with 8.97% in the second quarter and 5% a year ago.

Its portfolio of average managed credit-card loans, including those packaged into securities, shrunk 3% from the second quarter to $169.2 billion.

JPMorgan's results come a day ahead of when major U.S. credit-card issuers will release monthly data on the performance of credit-card loans.

-By Aparajita Saha-Bubna, Dow Jones Newswires; 617-654-6729; aparajita.saha-bubna@dowjones.com

(Marshall Eckblad in New York contributed to this article.)