U.S. lenders reduced their credit card debt despite an economic recovery
Americans cut $ 49 billion in credit cards in the first quarter as the U.S. recovery slowed, Federal Reserve researchers said it was “confusing” and “significant” in the context of the economic recovery.
A report by the Federal Reserve Bank of New York showed that all U.S. household debt was a record $ 14.6 million in the first three months of the year, up 0.6 percent from the fourth quarter of last year as mortgage yields remained close to record and balance sheets. car and student loans increased.
However, U.S. credit card balances fell the second-highest number in the 1999 statistical series, surpassing just $ 76 billion in the second quarter of last year as the pandemic forced the US economy, New York, to blockade. The Fed said.
“One of the most confusing changes in debt balances is the credit card,” New York Faith researchers said in a blog post. “The decline in the first quarter of 2021 is significant, in stark contrast to the recovery that has begun in the retail sector when the U.S. economy reopens and travel begins again.”
The decline in credit card balances helped offset the rise in car and student loan balances, pushing homeless balances lower than the previous quarter by $ 18 billion. Mortgage creation, including refinancing, was $ 1.1 million, below a record for the fourth quarter of last year, as mortgage balances rose $ 117 billion to $ 10.2 million.
New York Faith researchers warned in a blog post that the impact of the pandemic on consumer lending was “varied and irregular” and said the decline in credit card balances “should be interpreted with caution.”
But they added that “increasing volumes of retail sales suggest stimulus controls, tolerance programs, increased consumer confidence and joint demand to support consumption and help borrowers reduce expensive revolving debt balances.”
Faith researchers said it appears that families with high incomes and low incomes were paying off credit card debt. But they added that young people are more indebted to cards in recent months compared to older loans.
“We believe this reflects, in part, a differentiated response to the risks of the virus; younger people have begun to resume outdoor activities, and older people remain cautious about the risk, making the choice to stay at home,” they said.
The report also highlighted the reshaping of the U.S. financial landscape by government and bank tolerance programs.
Consumer credit arrears fell below levels at the beginning of the pandemic. The New York Fed said 3.1% of household debt was in a delinquency phase, 1.5 percentage points lower than in the first quarter of 2020.
Housing executions had the lowest level in the 1999 statistical series.