U.S. consumers have been paying down payments on credit cards with the pandemic continuing to hamper spending opportunities, which has led to dramatically falling bank card loans, The Financial Times (FT) reports.
According to the report, the total amount of card loans in U.S. banks was $755 billion, down $100 billion from before the pandemic, while balances have drifted lower in three of the last four weeks.
In addition, the amount of Americans opening new accounts was down to 8.6 million in the third quarter, almost 50 percent lower year over year, according to stats from TransUnion. That has also had a negative impact on banks, with card revenue for Citigroup falling 18 percent this year compared to 2019; a Wells Fargo bank analyst said credit card spending would likely stay down until COVID-19 was on the way out, the report says.
Matt Komos, vice president of research at the credit agency TransUnion, said consumers “are not spending on restaurants and movies, and a big chunk [of the decline] is travel, too,” according to the FT article.
“We used to see a pretty good surge around the holidays, but our survey suggests there is a lot of hesitancy [to spend],” Mr Komos said, according to the article. “I would be surprised if it was a weak Christmas, but it is really hard to forecast.”
Komos said government stimulus checks, heightened insurance benefits and the benefits of payment holidays had all been helpful in aiding consumers to pay their credit card balances.
In October, PYMNTS reported that Americans had been cutting their credit card balances for the sixth straight month. Revolving debt was down $9.4 billion in August compared with July, which is the lowest level since 2017.
That same month, J.P. Morgan and Citi reported earnings that seemed to go against analysts' expectations, which PYMNTS reported could bode well for families living paycheck to paycheck. J.P. Morgan reported earnings of $2.92 a share, ahead of its consensus estimate, while Citi reported earnings per share of $1.40, up from the 93 cents expected.