Americans paid off a record $ 83 billion in credit card debt in 2020
In many ways, the coronavirus crisis has paved the way for better budgeting.
Consumers pay off debts and save more than they have in decades. Many take advantage of low interest rates to refinance and lower their monthly bills.
Federal aid such as economic reviews, expanded unemployment benefits and a longer break in repaying loans have even given the opportunity to make up for overdue payments.
In total, Americans repaid nearly $ 83 billion in credit card debt in 2020 – a record according to a credit card debt study by personal finance site WalletHub.
This is only “the second time in 35 years that we’ve ended the year with even less credit card debt than we started,” said Jill Gonzalez, an analyst at WalletHub. (The first time was in 2009 after the great recession.)
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By the end of last year, the average household credit card balance had dropped to $ 8,089, according to WalletHub.
Credit cards are one of the most expensive ways to borrow money. Ticket prices are now averaging 15.99%, compared to a record high of 17.85%.
Many experts believe that once people are re-vaccinated and Covid restrictions are lifted, consumer spending could rise, which could undo some of the recent advances in debt eradication.
According to the National Retail Federation, economic indicators point to potentially record growth in retail sales in 2021.
Consumers have “a lot of purchasing power”, which together with the pent-up demand provides “growth accelerators”, said the trade association.
The $ 1.9 trillion for economic relief and stimulus programs would give an additional boost. The Democratic-run house plans to vote on Senate legislation on Tuesday so President Joe Biden can put it into law earlier this week.
“A short-term surge in spending is inevitable,” said Gonzalez.
“The question is what direction the pendulum will swing in 2022 and beyond,” she added. “I hope that consumers will internalize the lessons learned during the pandemic and show a newfound frugality.”
WalletHub predicts consumers will add roughly $ 50 billion in credit card debt in 2021 alone. The personal finance website used data from TransUnion and the Federal Reserve and Bureau of Labor Statistics.
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