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Michelle Singletary: Millions of consumers paid down their credit card balances during the pandemic. Let's keep this trend going.

Michelle Singletary: Millions of consumers paid down their credit card balances during the pandemic. Let's keep this trend going.

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When a beautiful rainbow appears after a heavy storm, I look at it with wonder. That’s the feeling I have knowing that millions of consumers eliminated high-interest credit card debt during the pandemic.

Ted Rossman, a senior industry analyst at and Bankrate, feels the same way. He’s excited about what could be a new normal for a lot of people — life without revolving credit card debt. The goal should be to pay off any debt you accumulate before the next billing cycle, instead of letting it roll over month to month.

“It seems kind of odd to say, but the truth is that many people’s finances actually improved over this past year,” Rossman said. “We can really credit stimulus with a lot of that. We can credit people spending less and really making debt payoff a priority. It’s really extraordinary.”

The share of “transactors” — or consumers who pay their credit card balances in full each month — reached an all-time high in the fourth quarter of last year, increasing to 35.1%, according to a recent report by the American Bankers Association. Conversely, the share of revolving accounts hit an all-time low, at 39.7%.

“There’s a real opportunity here to keep the momentum going and keep some of these new habits around,” Rossman said.

It’s Rossman’s job to follow and interpret credit card trends. Since we’re both advocates of people paying down credit card debt and becoming transactors, he reached out to me to discuss the latest quarterly report on household debt and credit from the Federal Reserve Bank of New York’s Center for Microeconomic Data.

The New York Fed reported that total credit card balances declined by $49 billion. It was the second-largest quarterly decline in the history of the data series, which originated in 1999. (The largest occurred in the second quarter of last year.) Total credit card balances fell from $927 billion in the fourth quarter of 2019 to $770 billion in the first quarter of this year, a 17% decline.

To put the data in context, all other household debt increased. Auto and student loan balances grew in the first quarter, by $8 billion and $29 billion, respectively. Mortgage balances — the largest component of household debt — rose by $117 billion, the New York Fed report said.

Even the researchers were surprised by the decline in credit card balances. “One of the most confounding changes in debt balances is that of credit cards,” New York Fed researchers wrote in a blog post about the recent consumer data, adding that “the decline in the first quarter of 2021 is remarkable because it stands in sharp contrast to the recovery underway in the retail sector as the U.S. economy reopens and travel resumes. In any case, it appears that many households are working to reduce their revolving debt balances, and this is happening across the board.”

Low- and high-income borrowers have been shedding debt, the New York Fed said. Using 2017 income data from the IRS, the Fed found that credit card borrowers with adjusted gross income between $46,000 and $58,000 reduced their card balances by 15% in the year since the pandemic began. Those with incomes above $58,000, including people earning more than $79,000, reduced their balances by 19%.

Looking at age, the New York Fed found that younger consumers in their 20s were nearly back to pre-pandemic spending. But credit card balances of older borrowers, particularly those 60 and older, continued to decline.

“We think this reflects, to an extent, the differential response to the risks from the virus itself — younger people have begun to resume their outside activities, while older people were more likely to remain cautious about the risk, opting to continue to stay home,” the researchers wrote.

Here’s what concerns me and Rossman. The hardest parts of the pandemic will pass, but the question is whether consumers will return to their spendthrift ways — revolving high-interest credit card debt.

Polls show Americans’ ratings of their finances have recovered from pandemic lows. Fifty-seven percent of Americans describe their financial situation as excellent or good, rebounding to almost where it was in 2019, according to an April poll by Gallup. Last year, Americans were worried about paying monthly bills or housing costs and making minimum payments on credit cards.

In my experience, an uptick in consumer confidence leads to taking on more financial risks, such as amassing credit card debt, which is expensive. According to recent data, as of May 19, the national average credit card rate was 16.15%. For consumers with bad credit, it was 25.30%.

“I am concerned that a lot of people will go back to their old habits,” Rossman said. “I’m hoping they can resist and make lower credit card debt part of their new normal.”

The pandemic forced consumers to give up a lot of things, so there will be pent-up demand to spend. But when you get back to living a more normal life, don’t go right back to revolving credit card debt.

Readers can write to Michelle Singletary c/o The Washington Post, 1301 K St., N.W., Washington, D.C. 20071. Her email address is


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