US Credit Card Debt at Lowest Since 2000

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If there is a single bright spot to be gleaned from the pandemic, it could be that American credit card debt is at its lowest rate in five years, based on statistics from the Federal Reserve’s Survey of Consumer Finances.

See: What Not To Do While Trying To Get Out of Debt
Find: How To Calculate Your Debt-to-Income Ratio

The Wall Street Journal reported that credit card debt in March 2021, based on Federal Reserve figures, reached a low of $749 billion. That’s down from $913 billion in January 2020, pre-pandemic. Credit card debt numbers began to dip during the pandemic, when people started using government stimulus funds to pay down their high-interest credit card debt and also curbed spending in the face of economic uncertainty.

Borrowers who were able to pause payments on mortgage and student loans may have used some of that money to pay down credit card debt, while at the same time, reducing their spending on things such as vacations, dining out and movie and concert tickets.

Now, Americans who may have shifted to debit cards during the pandemic are beginning to use their credit cards again, while also continuing to pay down debt, the Wall Street Journal says.

Make Your Money Work for You

Good News for Everyone Except Creditors

The drop in debt is good news for consumers, but not so much for the credit card companies, who are feeling the pinch. “Delinquencies can’t get much lower than where they are now, but if your loans keep shrinking, your revenues come down [and] margins will get worse,” Discover Chief Executive Roger Hochschild told the Wall Street Journal.

Read More: 30 Ways To Dig Yourself Out of Debt

The percentage of Discover credit card balances paid off at the end of the first quarter was the highest it’s been since 2000. Capital One, likewise, said nearly half of all credit card balances from the beginning of March were paid off by the end of March, a historical high, the Wall Street Journal reports. Synchrony Financial also told the Wall Street Journal that payment rates have been “higher than they averaged before the pandemic.”

All three companies showed drops in credit card balances of 9%, 17%, and 7%, respectively, the Wall Street Journal reports.

Tips to Pay Down Debt and Improve Your Credit Score

Make Your Money Work for You

Credit card issuers say they are increasing credit card limits and also loosening underwriting standards for new customers. They are also making marketing pushes to entice customers to open new lines of credit, according to the Wall Street Journal.

See: How To Determine Which Debts Are the Most Important To Pay Off in 2021
Find: 6 Reasons Why It’s So Hard To Get Out of Debt

If you are working on paying down credit card debt, now may be a good time to apply for a 0% balance transfer offer. You can also call your credit card companies and request a credit line increase. Since your debt-to-available credit ratio makes up a substantial part of your credit card score, increasing your credit line can boost your score, making it easier to qualifier for lower interest loans in the future.

You might also be able to negotiate an interest rate reduction, especially if you have another card available and can threaten to transfer the balance to your other card if the credit card company can’t reduce your rate.

For those who developed better spending habits during the pandemic, you can keep your credit card balances in check by continuing to use your debit card for purchases and budgeting carefully for luxuries like trips and dinners out.

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About the Author

Dawn Allcot is a full-time freelance writer and content marketing specialist who geeks out about finance, e-commerce, technology, and real estate. Her lengthy list of publishing credits include Bankrate, Lending Tree, and Chase Bank. She is the founder and owner of GeekTravelGuide.net, a travel, technology, and entertainment website. She lives on Long Island, New York, with a veritable menagerie that includes 2 cats, a rambunctious kitten, and three lizards of varying sizes and personalities – plus her two kids and husband. Find her on Twitter, @DawnAllcot.

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