2020 was one crazy year, from many points of view, affecting the way we work, earn, and spend. And while millions of citizens in the United States filed for unemployment, while others made the complete switch for working from home full-time, it also changed the way they used credit cards.
According to a study from Experian, a significant drop in credit card balances was registered in 2020, following more than ten years of continuous growth. Specifically, after 2019’s record high of $829 million, right before the debut of the pandemic, 2020 saw balances dropping by 9%, as the total of outstanding credit card debt in the U.S. is now around $756 billion. The lowest since 2017, as a side note.
What caused the decrease?
It appears that aspects like the relief from the CARES Act, which includes the suspension of student loan payments, as well as the one-time $1,200 stimulus check, had a big impact on the reduction in credit card debt.
The Congress keeps negotiating for even more relief, the measures taken so far have given Americans the opportunity to get a handle on their credit card debt.
New accounts are being opened, consumers charge less
The interesting part is that people kept opening new credit card accounts – over 12 million – this year, this being the first time in the 14-year history of Experian’s analysis when a lower debt burden, alongside an increase in accounts, was registered.
What does this premiere mean? It’s simple: the new accounts were used to pay off debt, but also used responsibly, paying off old debt on already existing cards.
On the other hand, it’s worth mentioning that over the past months, Americans have not been relying on credit, leading to an average credit card balance decrease of $879.
“The expectation that consumers would rely more heavily on revolving debt during an economic crisis is not far-fetched,” says Stefan Lembo-Stolba, for Experian. “But reality shows that three-quarters of the way through 2020, U.S. credit card debt is at the lowest it’s been for some time.