Credit Card Debt, Delinquency Rates Keep Falling

While the total amount of household debt continues its march upward, the amount of credit card debt had a huge decline during the first quarter of 2021, according to data released yesterday by the Federal Reserve Bank of New York, and coincides with a published media report that discusses how credit card issuers are more than a little worried about how many of their customers are paying off their unpaid balances.

The total amount of credit card debt decreased by $49 billion during the first three months of the year, and is now $157 billion lower than what it was at the end of 2019. The $49 billion decrease is the second-largest drop since the Federal Reserve Bank of New York began tracking the statistic more than two decades ago.

Synchrony Financial, the nation’s largest credit card issuer, reported that payment rates are so high that the average balance on its credit cards was 7% lower than it was in the first quarter of last year. The average balance at Discover is 9% lower, and at Capital One, it is 17% below last year’s figure. At Discover, the number of credit card balances that were paid off in the first quarter is the highest it has been since 2000, according to the report.

At the same time, delinquency rates on all types of credit were lower in the first quarter of 2021 than they were in 2020, according to the data released by the Federal Reserve Bank of New York. The percentage of debt that was seriously delinquent — meaning no payment had been received for at least 90 days — was 1.02% on student loans, down from 8.87% a year ago. For credit cards, the seriously delinquency rate was 3.78%, down from 5.31%.

Overall, there was $14.64 trillion of household debt at the end of the first quarter, up $344 billion from a year earlier. Mortgages, auto loans, and student loans accounted for most of that increase.

“2021 began with a strong increase in new extensions of mortgage and auto loan credit coupled with a substantial drop in credit card balances,” said Andrew Haughwout, senior vice president at the New York Fed, in a statement

. “However, surging retail sales volumes suggest that a combination of stimulus checks, increased consumer confidence, and pent-up demand are both supporting consumption and also helping borrowers reduce revolving debt balances.”