Consumers are increasingly letting their credit card debt revolve and letting interest mount instead of paying off what they owe each month.
Typically this is good news for banks, as credit cards are big money makers. During the pandemic, many bankers felt the financial pinch when stimulus checks filled consumers’ wallets, debt was paid down or off and people let their credit cards gather dust. People paid off $83 billion in credit card debt during the pandemic, CNBC reported.
While the surge in credit card borrowing is looking good on banks’ balance sheets, the record spike is happening alongside the highest inflation in 40 years, with gas, food and housing taking a big bite out of consumers’ paychecks.
See also: NEW REPORT: Paycheck-to-Paycheck Consumers 3x as Likely to Take On Credit Card Debt
Among cardholders living paycheck to paycheck, 34% of those without issues paying monthly bills and 47% of those who struggle to pay their bills “always” or “usually” have a revolving balance, according to a PYMNTS report last month.
Credit card balances and related loans are up 15% as of May 25 compared to the same time last year, and close to pre-pandemic numbers, Federal Reserve data shows. Because more consumers are letting the balances revolve, they’re incurring interest charges.
Read more: Credit Cards Being Used as Defense vs Inflation in Paycheck-to-Paycheck Economy
Banks said credit card holders are taking more time to pay down debt, Reuters reported. Discover said it’s still faster repayment than before than pandemic, but the rate leveled off and slowed in the first quarter.
Once the U.S. was mostly back to normal after COVID lockdowns, banks went on a marketing spree to attract more cardholders and even rolled back credit requirements tightened during the pandemic, per Reuters.
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