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Americans cut their credit card loans by $ 49 billion during the first quarter as the U.S. recovery picked up pace, a development that Federal Reserve researchers described as “confusing.” “and” remarkable “in the context of an economic revival.
A report from the Federal Reserve Bank of New York showed that total U.S. household debt hit a record $ 14.6 million in the first three months of the year, up 0.6% from in the fourth quarter of last year, as mortgage origination remained close to highs increased car and student loans.
However, U.S. credit card balances fell the second largest amount in a statistical series dating back to 1999, surpassed only by the $ 76 billion decline in the second quarter of last year, as the pandemic forced the blockade of the American economy, that of New York. Fed said.
“One of the most confusing changes in debt balances is that of credit cards,” New York Fed researchers said in a blog post. “The decline in the first quarter of 2021 is remarkable because it contrasts sharply with the ongoing recovery in the retail sector as the U.S. economy reopens and the journey resumes.”
The fall in credit card balances helped offset increases in car and student loan balances, pushing non-residential balances down $ 18 billion from the previous quarter. Mortgage origination, including refinancing, reached $ 1.1 million, just slightly below the record for the fourth quarter of last year, as mortgage balances rose $ 117 billion to $ 10.2 billion.
New York Fed researchers warned in a blog post that the “varied and erratic” impact of the pandemic on consumer borrowers meant that declining credit card balances “should be interpreted. with caution “.
But they added that “growing retail sales volumes suggest stimulus controls, tolerance programs, increased consumer confidence and accumulated demand can be both a consumer support and a help for borrowers to reduce revolving debt balances costs “.
Fed researchers said it appeared that both higher-income and lower-income families were paying off credit card debt. But they added that younger people have applied for more loans on their cards in recent months, in contrast to older borrowers.
“We believe this reflects, to some extent, the differential response to the risks of the virus itself: younger people have begun to resume their external activities, while older people were more likely to remain cautious about the risk and go choose to stay home. “they said.
The report also highlighted the reshaping of the US financial landscape by banking and government tolerance programs.
Consumer credit offenses fell even below their levels at the start of the pandemic. The New York Fed said 3.1% of outstanding family debt was at some point in default, 1.5 percentage points lower than in the first quarter of 2020.
Home foreclosures reached their lowest level in the 1999 statistical series.
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