The U.S. Consumer Financial Protection Bureau (CFPB) recently released its 2020 Consumer Credit Card Market Report, which shows that consumer credit card balances had spiked in the third quarter to a record-breaking $1.08 trillion. This figure marks an 11% increase, or $111 billion, from the previous quarter, and a 22% increase from the same quarter in 2019.
The CFPB report also showed that the number of open consumer credit cards had also reached an all-time high this quarter, with an estimated 487 million credit cards issued by financial institutions. This figure was up nearly 8% from the second quarter and 10% from the same quarter last year.
The jump in credit card balances may have been fueled by consumers taking advantage of various pandemic-related relief services offered by banks. These services, such as payment deferrals and waived late fees, may have allowed card holders to build up their balances in the third quarter.
However, the increase in balances is not necessarily a cause for concern. The CFPB report found that consumer card delinquencies, defined as payments past 30 days due, were down from the previous quarter at just 1.85%. This indicates that credit card holders are managing their payments in spite of the pandemic.
While the high credit card balances and number of open cards do present potential risks for financial institutions, it should be noted that these trends are not necessarily indicative of a period of overspending. It is likely that many households are using their credit cards simply to cover living costs amidst an economic recession.
Regardless of the reason behind the high credit card balances, it is important to keep them in check. To do this, consumers should use their credit cards carefully and keep track of their spending, so that they are not dealing with an unmanageable credit card debt in the future.
Breaking Records: Uncovering the Marked Increase in Credit Card Balances
