Many consumers set their credit cards aside during the pandemic, paying down existing balances and not applying for new cards, the Consumer Financial Protection Bureau said Wednesday.
In the first two quarters of 2020, the nationwide total of credit card debt declined to $811 billion from $926 billion before the pandemic, the largest six-month reduction in history, the CFPB said in a report, though the debt had crept back up to $825 billion by the end of the year. Credit card applications fell off, too, with over 140 million people applying for cards versus 172 million in 2019.
Government pandemic relief assistance, including enhanced unemployment and stimulus checks, likely contributed to the declines, along with the simple fact that with travel, dining, and entertainment options limited because of the pandemic, there weren’t as many opportunities to spend. Moreover, the increasing popularity of buy-now-pay-later plans may have led customers to shift debt away from traditional credit cards. In addition, credit card companies themselves offered various breaks to customers, which helped delinquencies on general purpose credit cards fall to their lowest levels since 2016.
“The decline in credit card debt during the pandemic was unprecedented in speed and magnitude,” said CFPB Acting Director David Uejio in the report.
The report adds to the growing amount of data showing how consumer spending and credit habits have drastically changed amid the pandemic.
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