The U.S. credit card market continued to boom in the third quarter of 2020, with Americans’ revolving credit card balances reaching a record high of $1.08 trillion. With the pandemic and the resulting economic stressors, it is no surprise that people are relying on their credit cards more than ever.
The most recent quarterly report from the Federal Reserve reveals that credit card debt rose by 8.3%, across all categories. This is the largest quarterly increase in the past four years, and it comes after a 5.3% growth in the second quarter of 2020.
The report also shows that revolving debt is now 2.2% higher than last year’s levels, which were already considered historically high. This high growth rate also means that the total amount of debt per household has grown by over 17%.
While Americans’ credit card usage has been climbing, the total amount of interest paid has also seen an uptick. During the third quarter of 2020, consumers paid nearly $112 billion on their credit cards — a 9.5% increase from the year before.
So what is driving this increased debt?
It’s likely that the pandemic has caused Americans to rely more on their credit cards for everyday purchases. With the widespread layoffs and job insecurity, many are having to resort to credit to buy necessities and pay for bills.
At the same time, credit card interest rates have remained fairly steady throughout the year, which has encouraged consumers to borrow more. According to the Federal Reserve report, the median interest rate on new accounts was 19.2%, while for existing accounts it was slightly lower at 16.2%.
However, not all of the credit card debt can be attributed to the pandemic. Many of the balances could also be related to purchases made by consumers who simply had more means and were willing to take on more debt.
Regardless, the fact remains that Americans’ credit card balances are at a record high, and it is unlikely that this will ease in the near future. As such, it is important for individuals to stay on top of their debt and ensure that they are not overextending themselves. This is especially true as we continue to face the economic woes created by the pandemic.
The U.S. credit card market continued to boom in the third quarter of 2020, with Americans’ revolving credit card balances reaching a record high of $1.08 trillion. With the pandemic and the resulting economic stressors, it is no surprise that people are relying on their credit cards more than ever.
The most recent quarterly report from the Federal Reserve reveals that credit card debt rose by 8.3%, across all categories. This is the largest quarterly increase in the past four years, and it comes after a 5.3% growth in the second quarter of 2020.
The report also shows that revolving debt is now 2.2% higher than last year’s levels, which were already considered historically high. This high growth rate also means that the total amount of debt per household has grown by over 17%.
While Americans’ credit card usage has been climbing, the total amount of interest paid has also seen an uptick. During the third quarter of 2020, consumers paid nearly $112 billion on their credit cards — a 9.5% increase from the year before.
So what is driving this increased debt?
It’s likely that the pandemic has caused Americans to rely more on their credit cards for everyday purchases. With the widespread layoffs and job insecurity, many are having to resort to credit to buy necessities and pay for bills.
At the same time, credit card interest rates have remained fairly steady throughout the year, which has encouraged consumers to borrow more. According to the Federal Reserve report, the median interest rate on new accounts was 19.2%, while for existing accounts it was slightly lower at 16.2%.
However, not all of the credit card debt can be attributed to the pandemic. Many of the balances could also be related to purchases made by consumers who simply had more means and were willing to take on more debt.
Regardless, the fact remains that Americans’ credit card balances are at a record high, and it is unlikely that this will ease in the near future. As such, it is important for individuals to stay on top of their debt and ensure that they are not overextending themselves. This is especially true as we continue to face the economic woes created by the pandemic.
