Credit Card Debt Continues to Decline Amidst COVID-19 Outbreak

Credit Card Debt Continues to Decline Amidst COVID-19 Outbreak

July 24, 2020         Written By Heaven Speirs

 

According to the latest Consumer Credit report from the Federal Reserve, outstanding credit card debt in America has dropped below $1 trillion for the first time since 2016. More specifically, revolving debt is at a multi-year low, but that is mostly made up of credit card debt.

Featured Prepaid Card

Top Features:

No late fees or interest charges because this is not a credit card it is a prepaid card.

Americans currently have $995.6 billion in revolving debt, compared to $1.1 trillion this time last year. Nonrevolving debt, such as auto loans and personal loans, has fluctuated throughout the quarter but has increased year-over-year.

What is the cause of this continual decline? All signs point to the COVID-19 pandemic.

Credit Card Debt Dropped Significantly between March and April

Between March and April 2020, revolving debt dropped by over $58 billion. This is when many companies began furloughing their employees and when most states began their shelter-in-place orders. With fewer places to spend money, credit card spending decreased. The decline continued in May, but at a much lower rate ($24.3 billion).

Personal Income and Disposable Income Dropped in May

The Bureau of Economic Analysis reports a 4.2% decline in personal income between April and May, along with a 4.9% decrease in disposable income. With less income, Americans wisely chose to spend less on their credit cards. We discussed this in our guide for protecting your credit score during the pandemic.

Another important note is that personal income increased by 10.8% between March and April, likely due to the first wave of economic impact payments. In that time, personal savings skyrocketed from $2.077 trillion to over $6 trillion. Many Americans put their stimulus checks into savings, unsure of their financial futures. Those who chose not to save their economic impact payments may have used the funds to pay down existing debt and lower their monthly bills.

Credit Card Companies Are Tightening Their Standards

Consumers aren’t the only ones uneasy about their financial futures. Credit card companies are also preparing for uncertainty by limiting the types of applicants they approve. Back in May, the Consumer Financial Protection Bureau reported a 6.8% decline in credit card applications. For consumers with a score of 780 or higher, that number jumped to 60%. Furthermore, credit card companies began reducing credit limits that were temporarily increased during the start of the pandemic. These factors likely contributed to the drop in credit card debt.

Continue to Avoid Unnecessary Debt for the Coming Months

Since the long-term financial impact of COVID-19 remains a mystery, avoid racking up unnecessary debt. You can still use your credit card for daily spending and pay off the balance each month. If you’re itching for a shopping spree, it may be best to wait a few more months. Use any disposable income you have to pay off your credit card debt, even if you have to do so in micropayments. Save what you can, shop smart, and set yourself up for a low-stress quarantine experience.

Don’t have a credit card for daily spending? No Problem – Lowcards.com is here to help YOU!

It is now easier than ever to find the perfect card tailored specifically for you thanks to this new tool, whether you are the busy mom supplying groceries for those kids that are quarantined at home and are eating a months worth of food in a week, or even the millennial planning their next trip out of the country when the quarantine is lifted, or possibly you are the overloaded businessman who has many expenses to keep up with because your business hasn’t stopped moving like the rest of the world, this amazing card matching tool will provide you with one or more card offers that fit you and your needs!

What are you waiting for? Check out what lowcards.com can do for you!

 

 

 

 

The information contained within this article was accurate as of July 24, 2020. For up-to-date information on any of the terms, cards or offers mentioned above, visit the issuer's website. Many of the offers on this article are from our affiliate partners, and LowCards.com may be compensated if you take action with any of our affiliate partners.

Review LowCards.com Editor’s Top Cards!

2020 Top Credit Cards by Category
Featured Prepaid Card
NetSpend® Visa® Prepaid Card
EDITOR RATING
Featured Prepaid Card
NetSpend® Visa® Prepaid Card

Applying for this card will securely direct you to the issuer's website.

Top Features: No late fees or interest charges because this is not a credit card it is a prepaid card. 

Featured Secured Card
Assent Platinum 0% Intro Rate Mastercard Secured Credit Card
EDITOR RATING
Featured Secured Card
Assent Platinum 0% Intro Rate Mastercard Secured Credit Card

Applying for this card will securely direct you to the issuer's website.

Top Features: Intro APR Offer on Purchases, No Annual Fee For First Year

Featured Fair Credit Card
Reflex Mastercard® Credit Card
EDITOR RATING
Featured Fair Credit Card
Reflex Mastercard® Credit Card

Applying for this card will securely direct you to the issuer's website.

Top Features: All credit types welcome to apply!

Featured Bad Credit Card
First Digital NextGen Mastercard® Credit Card
EDITOR RATING
Featured Bad Credit Card
First Digital NextGen Mastercard® Credit Card

Applying for this card will securely direct you to the issuer's website.

Top Features: Reports to all three credit bureaus, perfect credit not required for approval


heaven

About Heaven Speirs

Heaven Speirs is a contributing writer for LowCards.com. She remains up-to-date with the latest developments in the credit card industry and the financial sector as a whole. Heaven has over 10 years of experience in online journalism, the bulk of which has been focused on personal finance. Heaven attended Oklahoma State University, where she discovered her talent for research and content creation. In her spare time, Heaven enjoys painting, playing poker, and spending time with her husband and three dogs.