Credit card debt continues to decline in America, and experts state this is because of the coronavirus that has swept the world. The Federal Reserve reports the amount of consumer debt has fallen below $1 trillion for the first time in almost ten years. This is the third straight month that this figure has declined, which surprises many who believed the pandemic would have the opposite effect on the economy. However, experts state they expected this would happen. Why did they anticipate seeing this decline?
During the Great Recession, spending declined. Consumers know their finances are at risk during a time of crisis, leading them to spend less. Additionally, unemployment becomes a concern of many, and people choose to self-govern when it comes to their finances. They spend less because they remain concerned about their financial future. Personal income decreased by 4.2 percent in May, while disposable personal income decreased by 4.9 percent. With less money to spend, people spent less. However, people saved more during this same period, which shows they are being more cautious with their money. They reduced their non-essential credit card spending, and they see this in the decline in credit card balances.
Fewer Places to Spend
Closures across the nation contribute to the decline in credit card debt. Consumers find they can’t spend money at many of their favorite places, as the doors of these places remain shuttered. Restaurants remain a good example of this. American households, prior to the pandemic, spent more than $3,000 each year dining out. The United States Census Bureau’s Advance Estimates of U.S. Retail and Food Services report expects this figure to drop considerably in 2020, as sales were down 10.5 percent for the period between March and May 2020. More than half of all Americans state they are eating more at home, and 58 percent say they do this to save money. Travel has also declined drastically, and people have fewer places to go when they leave home.
The Response of Credit Card Companies
Credit card providers continue to struggle with revenue losses because of the pandemic. They have provided relief too many customers by pausing payments, or eliminating interest charges among other things. However, they also find they must charge off more debt, as their customers simply aren’t able to make the payments as agreed. Other customers find the credit card issuer has reduced their credit limit, and this could also contribute to the amount of reported consumer debt.
Men and women should take this time to reevaluate their finances and determine where changes need to be made. Some men and women might find they need help weathering this financial crisis, which could involve taking out a debt consolidation loan. This option needs consideration before the situation becomes dire, as a good credit score allows a person to get a consolidation loan with a better interest rate. Learn more about this option and the products available from Debthunch today. The sooner you address any problems you have with your finances, the easier they become to resolve. This pandemic will eventually end. Make certain your finances are in good shape when it does. A debt consolidation loan may be exactly what you need to ensure they are.