Credit card debt in the U.S. continued to fall in June as overall consumer borrowing rose after three months of falling amid the coronavirus pandemic, according to a report Friday by the Federal Reserve.
The report shows that consumer revolving debt – which consists mainly of credit card debt – fell to $ 992.4 billion from $ 994.7 billion in May.
Credit card balances hit an all-time high in February, shortly before the coronavirus pandemic began to affect consumer spending and bank lending, but plunged below the trillion-dollar mark in May – its lowest levels since from September 2017, announced CreditCard.com.
The decline in credit card debt underscores how the pandemic affected consumer spending habits, as households were reluctant to take on additional debt.
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Meanwhile, the personal savings rate in June was 19%, according to the Commerce Department’s Bureau of Economic Analysis.
The decline in credit card balances comes amid tightening credit conditions on their credit cards. About 60% of responding banks cited in the July Fed Senior Credit Officer Opinion Survey said they had lowered their credit limits, while about 60% were looking for higher credit scores.
Likewise, the protections given to many American consumers through the CARES Act, passed in March, prevented large-scale delinquencies from appearing in credit reports and undermining future access to credit, according to a second-quarter report from the Federal Reserve. of the New York Reserves.
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“The protections provided to American consumers through the CARES Act have prevented large-scale delinquency from appearing in credit reports and undermining future credit access,” said Joelle Scally, administrator of the Microeconomic Data Center at the New York Fed. “However, these temporary relief measures may also mask the very real financial challenges that Americans may be experiencing as a result of the COVID-19 pandemic and subsequent economic slowdown.”
According to the Fed report on Friday, the Federation of credit card lending was offset by an increase in the car loan and student lending category, which increased by $ 11.3 billion, or 4.3%.
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Consumer borrowing has been closely watched for the signals it can send about consumers’ willingness to continue borrowing to support their spending, which accounts for 70% of U.S. economic activity.
The Associated Press contributed to this report.