U.S. credit card use returning to pre-pandemic patterns, NY Fed report finds

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(Businesshala) – US consumers are spending more and once again holding up credit card balances, according to a report released by the Federal Reserve on Tuesday, reversing a shift that occurred during the crisis when consumers increased spending. Refunded and paid off credit card debt. Bank of New York.

FILE PHOTO: A member of staff cleans the day of the reopening of a credit card machine at the AMC Theater during the outbreak of the coronavirus disease (COVID-19) in Burbank, California, US, March 15, 2021. REUTERS/Mario Anzuoni

After increasing by $17 billion in both the second and third quarters, credit card use is returning to a pre-pandemic pattern, the researchers said. However, the balance was still $123 billion lower than at the end of 2019.

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Donghun Lee, a research officer at the New York Fed, said, “As pandemic relief efforts are in the air, we are seeing a reversal of some of the credit card balance trends seen during the pandemic, namely lower consumption and paying balances.” ” , said in a statement. “At the same time, as pandemic restrictions are lifted and consumption returns to normal, credit card usage and balances are resuming their pre-pandemic trends, albeit from lower levels.”

The researchers said credit cards generally follow a seasonal pattern, where balances see a “slight” increase in the second quarter and third quarter, followed by a higher increase in the fourth quarter. Consumers then typically reduce those balances in the first quarter as they pay for their vacation expenses, he wrote.

During the pandemic, however, families supported by direct cash payments and forbearance programs withheld payments on mortgages and student loans, substantially reducing their credit card debt.

Researchers at the New York Fed said that now that forbearance programs are closing in, some of those consumers who have paid off debt will be able to use some of their available credit to end up looking for jobs.

The report also found that total household debt rose by $286 billion to $15.24 trillion in the third quarter, mostly driven by a $230 billion increase in mortgage balances. The report showed that total debt balances are now over $1.1 trillion, where they were at the end of 2019.

Auto loans increased by $28 billion in the third quarter and student loan balances increased by $14 billion.

The findings showed that thanks to forbearance programs and other federal aid, consumer loan delinquency remains low.

Credit card issuance for borrowers with low credit scores has returned to pre-pandemic levels after declining at the start of the pandemic. But the majority of new loans issued across all types of loans are being given to high-quality borrowers, the researchers said.

Reporting by Zonal Marte; Editing by Andrea Ricci


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