Americans' credit card debt is shrinking rapidly during the coronavirus recession. That's a sharp contrast with the last two economic downturns.
The amount of consumer revolving credit, which is mostly credit cards, plunged by another $24 billion in May, the Federal Reserve said Wednesday. This costly form of debt is down more than $100 billion since hitting a record high in February and is now below $1 trillion for the first time in nearly three years.The dwindling pile of credit card debt is yet more evidence of how drastically consumer behavior is changing during the pandemic and this period of financial insecurity.
The March-May period marked the first time in a decade that overall consumer credit declined for three months in a row, according to Oxford Economics. However, some types of debt are showing signs of life. Specifically, the amount of nonrevolving credit, which is mostly student debt and auto loans, actually rose by $6 billion in May.Signals consumers are hunkering downCredit card debt typically carries punishing interest rates -- even for borrowers with the strongest credit scores.
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