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U.S. credit card debt continued to fall in June as consumer lending grew after three months of declines amid the coronavirus pandemic, according to a Federal Reserve report Friday.
The report shows that consumer debt – which mainly consists of credit card debt – fell to $ 992.4 billion from $ 994.7 billion in May.
US consumer lending picked up in June after three months of decline, but the major category of credit card debt extended its decline. (AP photo / Keith Srakocic, file) (AP)
Credit card balances peaked in February, just 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 September 2017, CreditCard.com reported.
The decline in credit card debt underscores how the pandemic affected the habits of consumer spending because households did not want extra debt.
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Meanwhile, the personal savings rate in June was 19%, according to the Bureau of Economic Analysis’s Department of Commerce.
The decline in credit card balances comes at noon from banks tightening the terms of their credit card lending. Some 60% of responding banks cited in the Fed’s July survey for senior lending officers by the Fed said they had tightened credit limits, while about 60% demanded higher credit scores.
Protecting many U.S. consumers through the CARES Act, adopted in March, caused large-scale delinquencies on credit reports and damaged future access to credit, according to the second quarter report from the Federal Reserve Bank of New York.
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“Protections provided to U.S. consumers through the CARES Act have prevented large-scale crimes from appearing on credit reports and damaging future credit access,” said Joelle Scally, administrator of the Center for Microeconomic Data at the New York Fed. “However, these temporary relief measures could also mask the very real financial challenges that Americans may face as a result of the COVID-19 pandemic and the subsequent economic downturn.”
According to the Fed’s Friday report, the credit card lending category was offset by an increase in the lending and student loans category, which increased by $ 11.3 billion, or 4, 3%.
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Consumer lending is closely watched for signals it may send about consumers’ willingness to hold loans to support their spending, which accounts for 70% of US economic activity.
The Associated Press contributed to this report.
