Late Credit Card Payments at Historically Low Levels in U.S.

(Bloomberg) -- U.S. credit card delinquencies reached record-low levels in 2020, as Americans took advantage of stimulus checks and adjusted their spending habits, according to a new report.

Delinquencies on bank-issued cards stood at 1.53% in the third quarter of 2020, virtually unchanged from the previous quarter, after rising to 2.62% at the onset of the pandemic as millions of Americans lost their jobs, the American Bankers Association trade group said in a report published Friday.

Financial support in the form of stimulus checks, as well as an array of payment adjustments — including mortgage and student-loan payment freezes — helped many consumers stay afloat. But the deepest recession in decades has increased inequality, as many of the lowest-paid workers remain unemployed.

People with car loans arranged through banks were making their payments, and deliquencies fell to 1.68% in the third quarter. But delinquencies for car owners with dealer loans rose to 2.09% in the third quarter — still below pre-Covid levels of 2.56% at the end of 2019.

The low delinquency rates are a sign that consumers are tightening their budgets to adjust to Covid-era realities, ABA senior economist Rob Strand said.

“Consumers have done an extraordinary job of spending within their means over the past decade, and they maintained that discipline throughout the recession caused by COVID-19,” said Strand. “Consumers have remained cautious about spending amid economic uncertainty and have leveraged their stimulus payments to help ensure they meet their obligations.”

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