The use of credit cards picking up in US

JONNELLE MARTEUS consumers are spending more and ramping up credit card balances, reversing a shift during the Covid-19 crisis, when they scaled back spending and substantially paid down debt, a Federal Reserve Bank of New York report showed on Tuesday.After rising by US$17 billion in both the second and third quarters, credit card use appears to be returning to pre-pandemic patterns, the researchers said. However, balances were still US$123 billion lower than at the end of 2019, according to the quarterly report on household debt and credit."As pandemic relief efforts wind down, we are beginning to see the reversal of some of the credit card balance trends seen during the pandemic, namely reduced consumption and the paying down of balances," Donghoon Lee, a research officer at the New York Fed, said in a statement. "At the same time, as pandemic restrictions are lifted and consumption normalizes, credit card usage and balances are resuming their pre-pandemic trends, although from lower levels."Credit cards typically follow a seasonal pattern, in which balances show "modest" increases in the second and third quarters, followed by a more substantial increase in the fourth quarter, researchers said. Consumers then usually reduce those balances in the first quarter as they pay off holiday spending, the report said.During the pandemic, however, households supported by direct cash payments and forbearance programs that paused payments on mortgages and student loans largely reduced their credit card debt.With forbearance programs winding down, some of those consumers may be able to use some of their available credit to make ends meet, the Fed researchers said.DebtThe report also found that total household debt increased by US$286 billion in the third quarter to US$15.24 trillion, driven mostly by a US$230 billion increase in mortgage balances. Total debt balances are now US$1.1 trillion above where they were at the end of 2019, the report showed. Auto debt increased by US$28 billion in the third quarter and student loan balances grew by US$14 billion.Originations of new mortgage loans, at US$1.1 trillion, and auto loans, at US$199 billion, both remained near series highs. Rising car prices contributed to the high volume for new auto loans by leading to a higher origination amount per loan, researchers said. The authors did not do a similar breakdown for mortgages but said rising home prices could be having a similar effect on mortgage debt.Lenders may be offering more credit to borrowers with lower credit scores after clamping down at the start of the pandemic, the report showed. For example, credit card issuance for lower credit score borrowers are back to pre-pandemic levels after declining at the start of the crisis. The median credit score for new mortgages and auto loans declined slightly in the third quarter, but was still high by historic standards, researchers said.The findings showed that consumer debt delinquencies remain low, thanks in part to forbearance programs and other federal aid. -Nampa/Reuters

The use of credit cards picking up in US

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The use of credit cards picking up in US

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