Accessible Version
Why Did Credit Card Balances Decline so Much during the COVID-19 Pandemic, Accessible Data
Figure 1. Total Credit Card Balances
Figure 1 shows the total credit card balances, separated into its 3 main components: revolving balances—defined as the previous statement balance minus payments; net purchase volume, defined as purchase volume minus any early payments that pay down these purchases prior to statement close, and other charges such as balance transfers. After falling from a high of about $625 billion in January 2020 to less than $550 billion in December 2020, total balances dropped further to about $500 billion by April 2021 before recovering to $520 billion by July 2021.
Note: Revolving balance is the previous statement balance minus any payments. Net purchase volume is new consumer purchases using credit cards less any prepayment of these purchases. Other charges are finance charges, fees, and other charges posted to the account. Key identifies bars in order from top to bottom.
Source: Federal Reserve Board, Form FR Y-14M, Capital Assessments and Stress Testing.
Figure 2. Paydowns and Prepayments
Figure 2 shows paydowns and prepayments of credit card balances since January of 2019. Paydowns are payment in excess of minimum due as a percentage of previous balance for borrowers with a revolving balance in the previous month. Prepayments are percent of purchase volume paid down before statement close. As Figure 2 shows, payments in excess of the minimum due as a fraction of the previous statement balance (in blue) reached historical highs of around 15 percent in early 2021, up from around 12 prior to the pandemic.
Note: Paydowns are payments in excel of minimum due as a percentage of previous statement balance for borrowers with a revolving balance in the previous month. Prepayments are percent of purchase volume paid down before statement close.
Source: Federal Reserve Board, Form FR Y-14M, Capital Assessments and Stress Testing.
Figure 3. Paydowns by Stimulus Eligibility
Figure 3 decomposes payments into those made by accounts eligible for the stimulus checks in 2020 and 2021 (in blue) and those ineligible (in orange). After undergoing only small changes in payments early in the pandemic, borrowers eligible for the stimulus increased their paydowns substantially at the start of 2021, likely supported by the second and third rounds of stimulus.
Note: Paydowns are payments in excel of minimum due as a percentage of previous statement balance for borrowers with a revolving balance in the previous month. Eligible for full stimulus are borrowers with reported individual (household) income of less than $75,000 ($150,000). Ineligible are borrowers with individual (household) income of more than $100,000 ($200,000).
Source: Federal Reserve Board, Form FR Y-14M, Capital Assessments and Stress Testing.
Figure 4. Prepayments and Prevalence of Revolvers
Figure 4 shows the share of accounts making prepayments and the share of accounts with revolving balances. The share of accounts that revolve a balance, in orange, declined from around 40 percent in early 2020 to a historical low of 33 percent by April 2021, before beginning to recover somewhat in the following months. Similarly, the share of accounts that make early payments, in blue, increased from 19 to almost 26 percent by April 21, then declined to 24 percent by July.
Note: Prepayments are payments made before statement close.
Source: Federal Reserve Board, Form FR Y-14M, Capital Assessments and Stress Testing.
Figure 5. New Credit Cards by Credit Score
Figure 5 shows new card originations since January 2019. New credit card originations, prime, near prime and subprime plummeted in the second quarter of 2020, before beginning a slow rebound in the second half of 2020.
Note: Data for the last month are partially estimated.
Source: Federal Reserve Board, Form FR Y-14M, Capital Assessments and Stress Testing.
Figure 6. Average Balances on New and Existing Cards
Figure 6 shows average balances on new and existing cards. Figure 6 shows, the decline in average balances among new cards, those originated within the past 12 months (blue line), is larger than among existing cards (orange line) since the start of the pandemic.
Note: New accounts originated within the previous 12 months.
Source: Federal Reserve Board, Form FR Y-14M, Capital Assessments and Stress Testing.