In many ways, the coronavirus crisis has paved the way for better budgeting.
Consumers pay debts and save more than they have in decades. Many use low interest rates to refinance and reduce monthly bills.
The federal exemption, such as stimulus controls, rising unemployment benefits and an extended break in loan repayments, have even offered chances to recover outstanding payments.
In all, Americans repaid nearly $ 83 billion in credit card debt in 2020 – a record, according to a credit card debt study by personal finance site WalletHub.
It only marks “the second time in 35 years, we’ve even ended the year owing less credit card debt than we started,” 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 stand at 15.99%, on average, down slightly from a record high of 17.85%.
Many experts predict that there could be an increase in consumer spending with the vaccination of more people and the removal of restrictions on Covid, which could nullify some of the recent progress in debt settlement.
According to the National Retail Federation, economic indicators indicate a potential increase in retail sales in 2021.
Consumers have “a lot of purchasing power” that will combine with reloaded demand to provide “growth accelerators,” the association said.
The $ 1.9 trillion economic recovery and the stimulus bill would provide an additional boost. The Democratic-led chamber plans to vote on Senate legislation on Tuesday so President Joe Biden can sign the law earlier this week.
“A short-term explosion of spending is inevitable,” Gonzalez said.
“The question is in which direction the pendulum will swing in 2022 and beyond,” she added. “My hope is that consumers will internalize the lessons learned during the pandemic and present a new frugality.”
WalletHub projects that consumers will add about $ 50 billion in credit card debt in 202 alone. The personal finance site used data from the TransUnion, as well as the Federal Reserve and the Bureau of Labor Statistics.
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