Report: Credit card debt plunges, driving a decline in overall household debt. – News

Credit card debt plunges, driving a decline in overall household debt.

Household debt fell in the second quarter as consumers stuck at home because of the coronavirus pandemic spent less on their credit cards, based on a new report from the Federal Reserve Bank of New York.

That may seem surprising on face value, with millions of American workers out of jobs and the economy experiencing a sharp recession caused by shutdowns meant to contain the virus. But the Fed’s findings, released Thursday, contribute to a growing body of evidence that suggests the government’s rescue programs and bill deferrals helped to keep many families from falling far behind financially during the early months of the pandemic.

  • Total household debt decreased between April and June, falling by $34 billion or 0.2 percent. It was the first decline since 2014 and the largest since 2013.

  • Credit card balances plummeted by $76 billion, the steepest drop on record.

  • Mortgages were another story entirely. Refinances and other originations boomed after the Fed slashed interest rates to near-zero in March, reaching $846 billion — the highest volume since 2013.

  • But there are signs that those cheap home loans are going to only the most creditworthy borrowers. Credit scores at origination ticked up sharply.

  • Debt delinquency rates dropped across credit categories. The New York Fed said that was “likely reflecting the impact of government stimulus programs and various forbearance options for troubled borrowers.”

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The post Credit card debt plunges, driving a decline in overall household debt. appeared first on New York Times.




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