Credit Card Balances Continued to fall in August
In August, credit card balances fell, according to data from the Federal Reserve. This is the second consecutive month that consumer credit card balances have dropped.
According to the data, revolving credit card debt decreased 3.4 percent or down to $790.1 billion. The data reveals a trend that consumers aren`t overspending as they had in the years before and right after the Great Recession of 2008. In addition to revolving debt, non-revolving debt which includes student loans, boat, auto, and trailer loans decreased 5.2 percent down to $1.65 trillion.
These two drops pushed the overall consumer credit rate down 4.6 percent, reaching only $2.44 trillion in the month of August. This marks the largest decline in over a year. Total debt has been on a steady decline for the past 10 months, while on the other hand; non-revolving debt had been increasing for the past 14 months.
Although the total debt is declining, consumers are still carrying roughly the same card balances. While revolving debt had been on a decrease, since consumers had decided to get on the right track about their finances, May and June marked increase in revolving debt, before dropping back down in July and August.
Credit card balances are on a roller coaster, despite debt levels decreasing. For over two years, consumers opted to pay off their debts first rather than charge the night away, for this reason, credit card balances began to fall. Now consumers are more acclimated with the financial climate and feel a little more comfortable spending more money and using their credit card more.
Consumers who find themselves in deep debt with no way out may consider doing a balance transfer. A balance transfer puts all of your debt onto one credit card, and then depending on the offer you get, gives you from 6 to 18 months to pay off your debt, interest free. This is only a smart move if you are committed to paying off your debt in that time period, because if not you may be subject to penalty fees and APRs up to 25%. A mess up with a balance transfer card can send you away with double the debt you started with. Be delicate with balance transfer credit cards.
It`s clear that the consumers have made financial changes, but so have credit card issuers and lenders. Another reason for the declining credit card balances in August is that banks accepted fewer credit card applications, reevaluated many of their customers super high credit limits, and charged off their default accounts. All of this is the result of the Credit CARD Act of 2009, which demanded more bank transparency and clearer credit card terms.
The CARD Act of 2009 cost the banks billions in potential revenue, but did a whole lot to reduce the total debt. According to the Federal Reserve, from September 2008 to April 2011, revolving balances went from $972.2 billion down to $789.2 billion. A total of $183 billion of revolving debt completely removed.
Latest Other Card News
2020 has definitely been a very unusual and challenging year. Many of us have been waiting for its end more than ever. And now, when there is less than a week left until the beginning of the new year, it’s time to sum up the outgoing one and find out the results of the annual […]
Walmart is finally ready to introduce a new subscription service offering free same-day delivery and fuel discount. Walmart+ was supposed to go live back in July, however, it was delayed due to the COVID-19 outbreak. Now the launch is planned to take place on September 15. The new product will help you order any goods […]
This month, American Express introduced its new tool called MyCredit Guide. The Amex website says: “We believe everyone should know their credit score and have the tools to understand it better.” That’s why the new feature was developed. Using the tool, you can find out your credit score and take a look at your credit report, […]
A virtual credit card is a unique credit card number that is linked to your main credit card account but is different from the physical card number. The virtual credit card number allows to shop online or over the phone without using your physical credit card. The numbers can usually be used once and expire if not used. The cardholders can also delete the numbers if they want or need to.
The results of the 2019 Debit Issuer Study, commissioned by PULSE®, a debit/ATM network, and conducted by Oliver Wyman, a global management consulting firm, show that consumer debit use has skyrocketed in the last year and will keep soaring. In 2018, the number of debit transactions increased by 6.7% reaching more than 68 billion. According […]