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U.S. lenders reduced their credit card debt despite an economic recovery

Americans cut $ 49 billion in credit in the first quarter as the U.S. recovery rate picked up pace, Federal Reserve researchers said it was “confusing” and “significant” in the context of the economic recovery.

A report by the Federal Reserve Bank of New York showed that total U.S. household debt hit a record $ 14.6 million in the first three months of the year, up 0.6 percent from the fourth quarter of last year as mortgage yields remained close to record and balance sheet records. car and student loans increased.

However, U.S. credit card balances fell the second-highest number in the 1999 statistical series, surpassing just $ 76 billion in the second quarter of last year as the pandemic forced the US (New York) economy to shut down. The Fed said.

“One of the most confusing changes in debt balances is with credit cards,” New York Faith researchers said in a blog post. “The decline in the first quarter of 2021 is significant, in stark contrast to the recovery that has begun in the retail sector as the U.S. economy reopens and travel begins again.”

The decline in credit card balances helped offset the increase in car and student loan balances, pushing non-housing balances $ 18 billion lower than the previous quarter. Mortgage creation, including refinancing, was $ 1.1 million, below a record for the fourth quarter of last year, as mortgage balances rose $ 117 billion to $ 10.2 million.

New York Faith researchers warned in a blog post that the impact of the pandemic on consumer lending was “varied and irregular” and said the decline in credit card balances “should be interpreted with caution.”

But they added that “wholesale retail sales volumes suggest stimulus controls, tolerance programs, increased consumer confidence and joint demand to support consumption and help borrowers reduce expensive revolving debt balances.”

Faith researchers said it appears that families with high incomes and low incomes were paying off credit card debt. But they added that young people have been charging more on cards in recent months compared to older loans.

“We believe this reflects, in part, their differential response to the risks of the virus. Young people have begun to resume outdoor activities, and the elderly remain cautious about the risk, making the choice to stay at home,” they said.

The report also highlighted the reshaping of the U.S. financial landscape by government and bank tolerance programs.

Consumer credit delinquencies fell below their levels at the beginning of the pandemic. The New York Fed said 3.1% of domestic debt was in a delinquency phase, 1.5 percentage points lower than in the first quarter of 2020.

Housing executions reached their lowest level in the 1999 statistical series.


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