Rather than rising as expected when unemployment soared amid coronavirus lockdowns, credit-card debt in the U.S. and other advanced economies has dropped.
From Wall Street Journal: When unemployment soared this spring at the start of coronavirus lockdowns, credit-card debt and delinquencies were widely expected to surge as struggling households borrowed more to make ends meet.
Instead, amid the deepest economic crisis since the Great Depression, the opposite happened. Credit-card debt in the U.S. and other advanced economies has fallen. Fewer people are late on their credit-card payments. Consumer demand for new borrowing—through credit cards, personal loans and even pawnshops—is down sharply.
The main reason, according to economists and financial executives, is government stimulus programs launched in the U.S. and other advanced economies that have worked unexpectedly well. The flood of money, along with debt-relief measures such as deferred-mortgage and student-loan payments, has stabilized the finances of many households and even left some in better shape than before the pandemic—at least for now.
“We’re not seeing consumers increase credit-card balances; in fact, they’re continuing to pay down balances,” said Peter Maynard, senior vice president at Equifax, the credit-reporting firm that tracks consumer borrowing in the U.S., Canada, the U.K. and other countries. “They’re using the injection of government stimulus, quite frankly, to put themselves in a better position.”
The phenomenon looms large as governments debate whether, and how, to extend stimulus programs. U.S. lawmakers and the Trump administration are negotiating new stimulus legislation, as the $600-a-week federal unemployment aid expired on Friday.
Read the full article at Wall Street Journal: https://www.wsj.com/articles/consumers-flush-with-stimulus-money-shun-credit-card-debt-11596373201
