Credit-Card Debt Returns to Levels Before Covid-19 Pandemic
Record card issuance and increased spending helped push total card balances to $916 billion last month
By AnnaMaria Andriotis, The Wall Street Journal, Oct. 28, 2022
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Card balances fell sharply in the early months of the pandemic after Americans, out of work and stuck at home, cut back on spending. Stimulus checks later padded savings accounts and allowed many to pay down costly debt…
Consumers are still paying a higher share of their balances than they were before Covid-19 hit, according to card issuers, but that figure at some lenders is starting to decline. The rising cost of food, gasoline and housing, meanwhile, has strained household budgets, forcing some Americans to use their credit cards to make ends meet. Consumers had credit-card debt of $5,529 on average in September. That figure has been rising but remains below its prepandemic peak…
The trillions of dollars in rainy-day funds Americans built up during the pandemic are dwindling. The personal saving rate as a share of disposable personal income fell to 3.3% in the third quarter, one of the lowest readings going back to the late 1940s and down from 26.4% in the second quarter of 2020, according to the Bureau of Economic Analysis… [end quote]
Easy come, easy go. In 2020 and 2021, the Covid stimulus came when many people were out of work. Many saved the stimulus. But now the personal savings rate is the lowest it has been for years, far below 2019. Americans still have plenty of personal savings compared with 2019 but seem to be spending it down and falling back into debt.
This is bad for individuals but good for the economy. As long as consumers spend the economy will be strong, increasing inflation due to higher demand. The Fed will be forced to keep tightening.
Banks are protecting themselves by gradually increasing the creditworthiness of their credit card holders.
Wendy