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If the only charges on your credit card recently have been takeout and the Disney+ subscription you forgot to cancel, you’re not alone.
American credit card debt has plummeted during the coronavirus pandemic, dropping below $1 trillion for the first time in years.
- The amount of consumer revolving credit (which is predominantly credit cards) decreased by $24 billion in May
While it may seem strange that credit card debt is decreasing in the middle of a recession, it’s important to remember that consumer behavior has changed dramatically during the pandemic. Restaurants, bars, and professional sports were shut down, giving people much fewer opportunities to swipe their cards.
Plus, with rampant unemployment and economic uncertainty, many Americans are choosing to pay off their existing debt and avoid racking up new debt. “Americans are behaving in an eminently rational fashion,” said Joe Brusuelas, chief economist at RSM International.
Credit card debt typically comes with extremely high-interest rates. The fact that this type of pricey debt is shrinking is encouraging, especially given the current economic uncertainty.