U.S. credit card debt drops as home and car loans hit record highs


Americans increased their borrowing to a record $ 14.6 trillion in March, driven by home and auto loans. But the growth masked what researchers at the Federal Reserve Bank of New York called a “bewildering” drop in credit card balances in a quarter as retail sales soared and prices trips have resumed.

The New York Fed report, the first look at household balance sheets as the economy began to rebound from the pandemic, shows mortgage, auto and student loan balances continued to rise. The same goes for the quality of new borrowers, many of whom take advantage of low rates to refinance their mortgage.

Credit card balances fell $ 49 billion in the first quarter, the second largest quarterly decline since data began to be compiled in 1999 – the largest occurred in the second quarter of 2020, when activity trade has been frozen by blockades.

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An influx of government pandemic relief funds and payment moratoria on student loans and other bills have allowed people to pay off their credit card balances for months now. Still, the magnitude of the decline in the first quarter is “remarkable” in light of the strong economic recovery, Fed researchers wrote.

“Soaring retail sales volumes suggest that a combination of stimulus controls, increased consumer confidence and pent-up demand are both supporting consumption and also helping borrowers reduce debt balances. renewable, ”said Andrew Haughwout, senior vice president of the New York Fed.

Credit card balances are now $ 157 billion lower than they were at the end of 2019, before the Covid-19 health crisis hit, according to the report.

Americans have a record $ 3.07 trillion available on credit cards, adding to the resiliency of household budgets to fuel emergency spending when needed.

While credit card cuts are happening across the board, older borrowers and those living in high-income areas have seen the biggest declines, according to the report.

However, older Americans, aged 60 and over, took out a record number of new mortgages in the last quarter, according to the report, possibly reflecting early retirements as they migrate to new regions or people. the elderly supported by stock market earnings allowing many to buy second homes. .

Auto loans hit a record high of $ 1.38 trillion last quarter and are increasingly extended to Americans with high credit scores.

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