American Credit Card Consumers Paid Down a Record $82.9 Billion in 2020

For only the second time in 35 years, Americans ended last year with less credit card debt than they started it with. Although U.S. consumers added $36.7 billion to their credit card debt during the fourth quarter of 2020 — snapping a three-quarter payoff streak — that wasn’t enough to erase the progress of the previous months. As a result, credit card debt fell by a record $82.9 billion year over year according to WalletHub. Moreover, the average credit card debt per household declined by 12% YOY, going from $9,193 in Q4 2019 to $8,089 in Q4 2020.

In addition to looking at trends for the U.S. as a whole, WalletHub also highlighted the cities that saw the largest decrease in average household credit card debt. Topping that list was Oxnard, California with an average $1,270 paydown per household. Oxnard was joined in the top five by West Valley City, Utah; Augusta, Georgia; Pearl City, Hawaii; and Shreveport, Lousiana — all of which maintained four-figure paydown averages. On the other end of the list, Burlington, Vermont had far and away the highest average increase, with credit card debt growing by $3,020 per household. Lewiston, Maine was a distant second with an average $948 increase followed by Fort Smith, Arkansas; Pembroke Pines, Florida; and Norfolk, Virginia.

Of course, the COVID-19 pandemic undoubtedly played a big role in 2020’s credit card debt paydown. While that may sound counterintuitive given the financial troubles many Americans faced during the year, a decrease in non-essential spending coupled with two rounds of stimulus funds may have contributed to the overall trend. In fact, 35% of those surveyed by WalletHub agreed that the pandemic actually made it more difficult to land themselves in serious credit card debt. Additionally, as several entertainment and hospitality venues tout the “pent up demand” they expect to be servicing in the coming month, one in ten respondents reported that they’re planning to embark on a shopping spree when the pandemic ends.

Commenting on what these 2020 debt figures mean, WalletHub analyst Jill Gonzalez stated, “The latest credit card debt statistics tell us that American consumers are actually getting healthier financially in some respects because of the coronavirus pandemic… Paying off so much credit card debt indicates that consumers have been making the most of the pandemic, by using the stimulus money and COVID restrictions to make their finances more sustainable.” Looking ahead, Gonzalez offered debt forecasts for this year and beyond, noting, “WalletHub is projecting that consumers will add around $50 billion in credit card debt during 2021. A short-term burst of spending is inevitable as pandemic restrictions are lifted. The question is which way the pendulum swings in 2022 and beyond. My hope is that consumers will internalize lessons learned during the pandemic and showcase a newfound frugality.”

With the pandemic ongoing, it’s too early to predict what financial lessons learned during this period will last as normal life resumes. Meanwhile, with a third round of stimulus payments looking likely, there’s a good chance we’ll see further credit card debt paydowns in the short-term. Therefore, we’ll need to keep an eye on future figures to see what long-term trends may emerge.

Author

Jonathan Dyer

I'm a small town guy living in Los Angeles looking to make solid financial decisions. I write for a number of finance websites, including HuffingtonPost and Business2Community. I founded DyerNews.com in 2015 to focus on personal finance and the emerging FinTech markets.

Other Articles by Jonathan Dyer

Carbon Credit API Cloverly Joins Visa's FinTech Partner Connect 

Last year, Visa introduced the FinTech Partner Connect program to the United States, with the goal of introducing institutions to vetted startups that could help them expand their product offerings. Now, the latest company to join the program is Cloverly. Founded in 2019, Cloverly is an API for carbon credits, allowing businesses and consumers to help fight climate change. As the company points out, with the Visa partnership, Visa clients...

Prosper Announces $75 Million Growth Capital Financing

A long-admired FinTech has added some new capital to its coffers and it continues to grow after more than 15 years in business. Recently, Prosper Marketplace announced that it had closed a $75 million debt financing round. This capital came from a fund managed by Neuberger Bergman and will be used to help Prosper meet the demand for its loans, credit card, investment products, and more. According to the company,...

Small Business Saturday 2022 Drives Projected $17.9 Billion in Sales

This past weekend saw the kick-off to the holiday shopping season with Black Friday followed by Small Business Saturday. Now in its 13th year, the latter is a promotion meant to raise awareness for small local businesses and encourage consumers to support them. Now, the initial figures from this year's event have arrived. According to American Express (which actually invented the retail holiday in 2010), an estimated $17.9 billion were...