Credit card debt is decreasing
Earlier this year, a study by Truth in Accounting, a non-profit organization, reported a large majority of the most populous cities in the U.S. didn’t have enough money to pay their bills in 2018. In 2019, another study found similar problems with credit card debt. Despite high struggles in the last two years, interestingly enough, the COVID-19 pandemic has resulted in the overall level of credit card debt plunging.
Debt for revolving credit decreasing
CNN recently reported the Federal Reserve said the amount of consumer revolving debt, which is mostly made up of credit card debt, is decreasing. The agency said it fell below the $1 trillion mark for the first time in three years. Total debt has fallen more than $100 billion since the beginning of the year. This might sound unusual since the U.S. economy is currently struggling due to unemployment rates, stay at home orders, and businesses closing.
People are spending less
It seems the major reason for this decline is people are spending less during the pandemic. They are also less willing to accumulate debt while unemployment rates are still high. Consumers are also afraid of losing their jobs. Other reasons people are spending less include:
- Fewer ways to spend money as businesses remain closed.
- Travel levels are way down due to health risks associated with traveling.
- People spend less at restaurants since they have more time to cook at home while quarantined.
- Malls, movie theaters, and other entertainment venues remain closed, or those open pose more risk of contracting COVID-19, so many people avoid them.
- People generally say they plan to start saving more money.
Being it is still very uncertain about how long the pandemic will last, it's very possible that credit card debt may continue to fall. For the most part, people are worried about paying their regular bills, keeping healthy, and staying employed for the near future.
Credit card rates are dropping
Credit card companies often charge high rates, even for people with excellent credit. For those who have poor to average credit, these rates soar even higher. However, as the economy declines, credit card rates are dropping too. Currently, the average credit card interest rate is 16.03%. Creditcards.com reports this is 1.27 percentage points lower than it was just five months ago when the pandemic started. People who are struggling with their credit card debt right now might now find it a little easier to try to pay down some of the money they owe.
With debt decreasing, now is a good time for consumers to improve their credit standing. PRBC offers people a chance to prove to lenders they are reliable borrowers by enabling them to pursue an alternative credit score simply by paying their regular bills.
If your credit score dropped due to conditions put into motion by the pandemic and has prevented you from accessing loans or better credit terms, contact PRBC today to learn how our alternative credit score solution can help you with it.