During the third quarter of 2020, credit card balances hit a record of $1.08 trillion. This is the highest level that credit card balances have reached since 2008, according to the Federal Reserve Bank of New York. This is concerning considering the economic toll the global pandemic has taken on consumer spending and financial security. But how did we get here?
The use of credit cards has been on the rise for some time now. In the past seven years, the number of credit cards in use has nearly doubled. This increase in card usage has been driven by the convenience of having a payment method that can be used online and offline. During the pandemic, many businesses had to shift their operations to the online space and as such, credit cards have become a more popular method of payment.
At the same time, many consumers are in need of extra funds to cover their expenses. There has been an increased reliance on credit cards for both regular and emergency purchases. This has pushed credit card balances higher as more people are using their cards to pay for things.
As a result, credit card companies have had to increase their lines of credit to keep up with the high demand. This has contributed to the spike in credit card balances since many of these lines of credit have been raised to help people meet their needs.
Finally, the job market during the pandemic has been shaky, leading to an increased number of people facing financial hardship. Many of these individuals have turned to credit cards as a way to get money when other sources weren’t available. As a result, these individuals have ended up accumulating large amounts of debt that has added to the overall credit card balance levels.
These are just some of the factors that have contributed to the record high credit card debt levels. Moving forward, it will be important to watch the trend of credit card balances and see how it is affected by the pandemic.