In many ways, the coronavirus crisis has paved the way for a better budget.
Consumers pay off debt and save more than in decades. Many use low interest rates to refinance and lower their monthly bills.
Federal relief, such as stimulus tests, extended unemployment benefits and a prolonged hiatus of loan repayments, have even given some a chance to catch up on past payments.
In all, Americans repaid nearly $ 83 billion in credit card debt by 2020 – a record, according to a credit card debt study by staffing website WalletHub.
This is only ‘the second time in the last 35 years that we have even ended the year due to less credit card debt than we started with’, said Jill Gonzalez, an analyst at WalletHub. (The first time was in 2009, after the Great Recession.)
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By the end of last year, the average household credit card balance had dropped to $ 8,089, WalletHub found.
Credit cards are one of the most expensive ways to borrow money. Card rates now average 15.99%, slightly below a record high of 17.85%.
Many experts predict that there could be an increase in consumer spending once more people are vaccinated and Covid-related restrictions lifted, which could undo the recent progress in debt repayment.
According to the National Retail Federation, economic indicators point to the potential growth in retail sales during 2021.
Consumers have ‘a lot of buying power’ that will combine with a pent-up demand to offer ‘accelerators for growth’, the trade association said.
The $ 1.9 billion economic relief and stimulus bill will give an extra boost. The Democratic House plans to vote on Senate legislation Tuesday so President Joe Biden can sign it early in the week.
“A short-term eruption is inevitable,” Gonzalez said.
“The question is which side will swing the pendulum in 2022 and beyond,” she added. “My hope is that consumers will internalize lessons learned during the pandemic and demonstrate a newfound sobriety.”
WalletHub plans to add $ 50 billion to credit card debt in 2021 alone. The personal finance website used data from TransUnion as well as the Federal Reserve and Bureau of Labor Statistics.
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