American credit card debt plummeted during the coronavirus
pandemic, dropping below $1 trillion for the first time in years.
That's according to new data published by the Federal
Reserve, which found the amount of consumer revolving credit -- which is
predominantly credit cards -- fell by $24 billion in May to $995.6 billion
following April's record $58.2 billion decline.
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It's the first time since September 2017 that card balances
have fallen below the trillion-dollar mark.
On average, the interest rate on credit cards was 14.52 percent
in May, down from 15.09 percent in February, when it last reported this figure.
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The debt is down almost $100 billion from the start of the
year, before the virus gained a foothold in the U.S., dragging the nation's
economy into the worst downturn since the Great Depression.
The shrinking debt highlights how the virus outbreak and
subsequent recession changed consumer spending -- which accounts for roughly
two-thirds of the nation's GDP, the broadest measure of goods and services
produced in the country -- as U.S. households tried to avoid taking on new
debt.
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Even as the coronavirus outbreak and related economic
shutdown triggered a tidal wave of job losses, the personal savings rate in the
U.S. surged to 33 percent in April, according to the Commerce Department’s
Bureau of Economic Analysis. As states started to reopen their economies in
May, the rate fell to 23.2 percent.
Meanwhile, nonrevolving credit debt, which includes
mortgages, auto, student and personal loans, rose to more than $3.1 trillion in
May, after declining slightly in April.
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