US credit card debt drops as home, auto 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 “confounding” decline in credit card balances in a quarter when retail sales soared and trips have resumed.

The New York Fed’s report, the first snapshot of household balance sheets as the economy began to rebound from the pandemic, shows mortgage, auto and student loan balances continued to rise. So is the quality of new borrowers, many of whom are taking advantage of low interest rates to refinance their home loans.

Credit card balances fell by $49 billion in the first quarter, the second largest quarterly decline since data began to be compiled in 1999 – the largest was in the second quarter of 2020, when business activity was frozen by blockages.

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An influx of government pandemic relief funds and payment moratoriums on student loans and other bills have kept people paying 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, the Fed researchers wrote.

“The surge in retail sales volumes suggests that a combination of stimulus checks, 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, bolstering the resilience of household budgets to fuel emergency spending if needed.

While the reduction in credit cards is happening across the board, older borrowers and those living in high-income areas have seen the steepest declines, according to the report.

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

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

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