Despite the coronavirus pandemic refusing to subside, credit card debt fell in June, according to the U.S. Federal Reserve. The drop in outstanding debt was lower than the rate seen in May, but it continues a promising trend.
Revolving Credit Card Debt Continues to Decline
The Fed’s report shows that the total outstanding balance of revolving debt in the U.S. fell to $992.4 billion in June. The total outstanding debt in May was $994.7 billion.
While a 2.4% decline in debt is lower than the rates seen in previous months, it’s still indicative of a dip in consumer confidence because of the coronavirus pandemic. June, for example, saw a 10.5% decline in credit card debt – the most significant drop on record.
February 2020 saw credit card balances reach an all-time high. Once the realities of the COVID-19 pandemic set in, however, overall debt began to fallen significantly. Outstanding credit card debt sunk below the trillion-dollar level in May – the first time this occurred since September 2017.
When Will Consumer Confidence Return to Pre-Pandemic Levels?
The coronavirus outbreak, which is still raging in many parts of the United States, has severely impacted consumer confidence. While some indicators show that confidence is returning, many American households still seem to be avoiding adding additional debt.
One of the most noteworthy signs of returning consumer confidence is the decline in credit card relief program enrollment. After enrollment in these relief programs rose by 25% in March and April, it declined significantly in May. Discover CEO Roger Hochschild claimed that 80% of Discover cardholders enrolling in their coronavirus relief program began making regular payments in May and June.
Related Article: What Types of Credit Card Relief Do Banks Offer?
How to Handle Credit Card Debt and Payments During COVID-19
One of the biggest impactors of consumer confidence is the high level of unemployment. The sheer volume of Americans out of work – or fearing job security – has reduced the appeal for taking on new debt. According to a CNBC survey, over 80% of Americans fear they won’t be able to make even the minimum payment on their credit card.
While the future of additional stimulus payments is uncertain, there are proactive steps concerned Americans can take to manage credit card debt and costs during the coronavirus pandemic. These steps include:
- Reducing spending on non-essential goods
- Considering credit card relief programs from your lender
- Debt consolidation or refinancing
- Checking eligibility for government relief programs
Related Article: Five Tips to Manage Your Finances After Losing Your Job