- Americans cooped up at home due to the pandemic cut their collective credit card debt by $82.9 billion last year, according to research firm WalletHub, a Washington personal finance data research unit owned by Evolution Finance. That was an all-time record debt repaid, according to data reaching back to 1986.
- Total credit card debt for Americans declined 10.8% to $955.4 billion as of the fourth quarter, adjusted for inflation, slipping under last year's trillion-dollar-plus mark, according to WalletHub, which bases its study on Federal Reserve and credit agency TransUnion data. Also, credit card companies swept less credit card debt off their books.
- The study predicts a post-pandemic bump in spending this year, with consumers likely to add about $50 billion in credit card debt. That would still be short of the $54.2 billion added annually on average over the past 10 years.
Despite pulling back on credit debt last year, Americans have a long way to go in changing their ways. Over the past 10 years, they've deepened their debt load, according to WalletHub, which has been publishing the report since 2016 and uses data reaching back to 1986.
It was only the second time in 35 years that Americans ended the year owing less than they did at the beginning of the year, WalletHub analyst Jill Gonzalez said in a press release.
"Paying off so much credit card debt indicates that consumers have been making the most of the pandemic, by using the stimulus money and COVID restrictions to make their finances more sustainable," Gonzalez said.
Average credit card debt per household nationwide slid 12% to $8,089 as of the fourth quarter last year, compared to the last quarter of 2019. Consumers in California paid down their debt at some of the highest rates, with Oxnard, California, leading the way and four more of that state's cities showing up in WalletHub's list of those with the most debt discarded per household last year.
The rate at which consumers were defaulting on their credit card debt also declined, with a card charge-off rate of 2.53% in the fourth quarter, down from 3.65% in the fourth quarter of 2019, the study said.
Despite the annual overall drop in consumer credit card debt last year, spending began to pick up in the fourth quarter as the coronavirus vaccines were rolled out, local restrictions on commercial locations eased, and some businesses opened their doors for more in-person commerce. Consumers added $36.7 billion in credit card debt during the fourth quarter of last year. Nonetheless, that was still significantly less than the $57.8 billion they added in the last quarter of 2019.
Credit providers felt the decline last year and will likely welcome a recovery, but WalletHub's outlook doesn't suggest American consumers will take off on a buying spree this year. On the contrary, only about one in 10 said they'd be likely to ramp up spending to that degree, though expenses for healthcare are an exception to their newfound frugality. Two-thirds will try to lower the interest rate on their credit card debt this year, the data firm said.