The coronavirus pandemic has taken an immense toll on the American economy. With unemployment soaring and businesses closed, more people are relying on their credit cards to survive. Now, according to a report from the Federal Reserve, the nation has seen a record number of credit card balances in the third quarter of 2020.
The report from the Federal Reserve reveals that the total amount of credit card balances reaching a high of $1.08 trillion, unsually increasing 12.2% from the $962 billion reported for the second quarter. This growth in credit card debt is even more staggering when compared to the same period in 2019. The total balance was $893 billion, rising just 5.3% from the year before.
This massive leap in credit card usage is likely due to the necessity of borrowing for recovery from the financial hardships brought on by the pandemic. As businesses remain closed, many Americans find themselves relying on credit to cover everyday purchases needed to survive. And yet, even in the midst of an economic crisis, some have chosen to use their credit cards to finance hobbies and other discretionary spending.
While it’s concerning to see the spike in credit card balances, the pandemic has shed a light on the importance of having a financial cushion. Many have come to realize that having a savings account or emergency fund could have saved them from such a precarious situation. And though it’s too late for them, this experience provides a lesson for those who continue to manage their finances during this time.
It’s important to keep a careful watch on your credit cards and repay any balances promptly. Late payments can easily cause interest rates to skyrocket, quickly turning into a financial burden. With these rising balances, it’s also important to take time to consider how you can consolidate your debt to reduce the strain and find a way forward.
In these difficult times, it’s essential to stay in control of your finances and find ways to make manageable payments. Despite the pandemic, the Federal Reserve report indicates a slight drop in the delinquencies for credit card balances, suggesting that individuals are actively staying on top of their payments.
The pandemic has been incredibly difficult for many, but these figures provide hope for recovery. It’s essential to be mindful of your finances and take the necessary steps to reduce debt and stress. With careful consideration and management, a sound financial plan can lead us towards a brighter tomorrow.