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COVID-19 Pandemic Assistance Reduced Credit Card Debt, Warns Report

Strategic Insights

— 2 min read

A new report from the Government Accountability Office (GAO), commissioned by Senators Bernie Sanders and Sheldon Whitehouse, reveals that federal pandemic assistance significantly decreased credit card debt among working-class Americans. The report found that the $1,737 average credit card balance in April 2020 decreased to $1,529 in December 2021, a 12% decline. However, the study also highlights that credit card debt remains a significant issue, with 532 million credit cards representing a total outstanding debt of $856 billion as of 2021. The report's findings are particularly concerning, as they show that credit card users living in majority Black and Hispanic zip codes face higher interest rates and lower credit limits, making it more challenging to pay off debt.

Key Takeaways:

  • The COVID-19 pandemic assistance programs, such as economic impact payments and expanded child tax credits, helped reduce credit card debt among working-class Americans.
  • The GAO report found that the average credit card balance decreased from $1,737 in April 2020 to $1,529 in December 2021, a 12% decline.
  • Credit card debt remains a significant issue, with 532 million credit cards representing a total outstanding debt of $856 billion as of 2021.
  • Americans paid an average of $120 billion in credit card interest and fees from 2018-2020, approximately $1,000 per household per year.
  • The average credit card interest rate in the U.S. is 22.77%, more than four times the average rate for an auto loan.
  • Credit card users living in majority Black and Hispanic zip codes face higher interest rates, lower credit limits, and longer payment periods compared to those living in predominantly white zip codes.
  • Cardholders of color pay approximately 1.3% more in interest on average.
  • Credit limits for Black and Hispanic cardholders are $3,412 and $4,285 lower, respectively, than those for white cardholders.
  • Credit card ownership varies by race and ethnicity, with 93% of Asian adults, 88% of white adults, 77% of Hispanic adults, and 72% of Black adults owning a credit card.

Statistics:

  • The average credit card balance decreased from $1,737 in April 2020 to $1,529 in December 2021, a 12% decline.
  • There were 532 million credit cards representing a total outstanding debt of $856 billion as of 2021.
  • Americans paid an average of $120 billion in credit card interest and fees from 2018-2020, approximately $1,000 per household per year.
  • The average credit card interest rate in the U.S. is 22.77%.
  • Cardholders of color pay approximately 1.3% more in interest on average.
  • Credit limits for Black and Hispanic cardholders are $3,412 and $4,285 lower, respectively, than those for white cardholders.

Sources:

  • Government Accountability Office (GAO) report, "Credit Card Debt and Interest Rates" (2022)
  • Senate press release, "Sanders, Whitehouse Press Senators' GAO Report Exposing the High Interest Rates and Debt Repayment Obstacles Plaguing American Families" (2022)
  • Federal Reserve report, " Credit Card Interest Rates" (2021)

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