Credit Card Trends Begin to Normalize after Pandemic Paydown

Haughwout, Andrew F.; Lee, Donghoon; Mangrum, Daniel; Scally, Joelle; Van der Klaauw, Wilbert

Discussion Paper

Credit Card Trends Begin to Normalize after Pandemic Paydown

Abstract: Today, the New York Fed’s Center for Microeconomic Data released its Quarterly Report on Household Debt and Credit for the third quarter of 2021. Overall debt balances increased, bolstered primarily by a sizeable increase in mortgage balances, and for the second consecutive quarter, an increase in credit card balances. The changes in credit card balances in the second and third quarters of 2021 are remarkable since they appear to be a return to the normal seasonal patterns in balances. In a Liberty Street Economics post earlier this year we wrote about some demographic variation in these balance changes and the likely role of stimulus checks and forbearance programs in helping borrowers pay down expensive revolving debt balances. Here, we’ll take a fresh look at credit card balances and at the dynamics behind new and closing credit card accounts and limit changes, to examine how credit access and usage continue to evolve. The Quarterly Report and this analysis are based on our Consumer Credit Panel, which is itself based on Equifax credit data.

Keywords: household finances; Consumer Credit Panel (CCP);

JEL Classification: D14;