Stimulus Money Minimized Impact Retail Closures Had on Store Credit Cards

Shopper hands buying with credit card on laptop.
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Despite limited access to physical stores during the onset of the pandemic, retail credit card asset-backed securities were not affected by store closures and did not lead to increased defaults, according to data from Fitch Ratings.

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After three rounds of stimulus aid, more Americans were able to put cash into savings or put it towards any outstanding debt. A Northwestern Mutual study found that personal debt has dropped by more than 20% since 2019.

“The fact that people are making significant progress to decrease their debt is encouraging to see, especially at a time when many are still recovering from the financial impact and uncertainties prompted by the COVID-19 pandemic,” said Christian Mitchell, executive vice president & chief customer officer at Northwestern Mutual.

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Retail credit card trust performance is largely affected by consumer strength. While charges slowed at the start of the pandemic, they have since risen to higher than pre-pandemic levels. Fitch Ratings cites the willingness of consumers to use federal unemployment benefits and individual stimulus checks to pay down credit card debt.

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According to Fitch’s retail credit card index, the 12-month average of late payments 60 days or more was down from 2.78% in March last year to 1.77% in August. Chargeoff rates are still low, at a 12-month average of 4.92%, as of August 2021, from 7% in March 2020. Payment rates also averaged just under 21% in the second quarter of 2021, compared with 17.1% in March 2020. Increases in credit card balances continue to trend upwards.

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Fitch Ratings also noted that it’s too early to tell if the balance increases will continue as the Delta variant spreads and consumer confidence declines. Retail cards are also lower in consumers’ payment priority.

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Last updated: September 23, 2021

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About the Author

Josephine Nesbit is a freelance writer specializing in real estate and personal finance. She grew up in New England but is now based out of Ohio where she attended The Ohio State University and lives with her two toddlers and fiancé. Her work has appeared in print and online publications such as Fox Business and Scotsman Guide.
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