Credit Card Debt Back to Pre-Pandemic Levels

Nov 14, 2022Banks & Credit Unions, News

In September, total credit card balances in the U.S. jumped to $916 billion, which is almost identical to where it was before the pandemic, according to credit-reporting firm Equifax. Balances rose 9 percent from January, and are about 23 percent higher than the pandemic low in April 2021.

“You have an increasing number of people running out of that excess savings, but it’s small,” said Mark Zandi, chief economist at Moody’s Analytics, according to the Wall Street Journal. “The folks who are the most pressed are starting to turn to debt to supplement their income to maintain their spending.”

Credit card balances fell greatly at the beginning of the pandemic when many Americans were quarantined at home and out of work, and stimulus checks later boosted savings and let people pay down debt. Now many are borrowing and spending despite concerns of a potential recession.

Consumers are paying a higher share of their card balances than before the pandemic, but that number is declining as the increased costs of gas, food, and housing has caused many Americans to use their credit cards to get by. Many card issuers have halted lending to consumers that would be vulnerable in a recession, and some have set aside money to cover potential loan losses.

 The Bureau of Economic Analysis found that savings are dwindling; Americans’ personal savings rate fell to 3.3 percent in the third quarter of this year, down from 26.4 percent in the second quarter of 2020, and one of the lowest rates since the late 1940s.

Lenders issued about 47 million general-purpose credit cards during the first seven months of the year, and nearly 9.6 million of those cards were issued to consumers with credit scores below 620. In July, prime and subprime consumers who got a new credit card were given average spending limits of $5,115 and $892 respectively.

Many lenders have also amped up offers for credit cards that include interest-free periods, which likely contributes to the increased balances, since most consumers are not pressed to pay down debt during the promotional period.

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