Credit card balances reach pre-pandemic levels—but consumers face new pressures

Article by Adriana Nunez | Oct 31, 2022

The data: Total US credit card balances hit $916 billion in September—reaching pre-pandemic levels for the first time, according to Equifax data cited by the Wall Street Journal. Balances in September mirrored December 2019 levels and were 23% higher than their pandemic low in April 2021.

What’s the catch? Although credit card balances have normalized, card issuers should remain alert as economic uncertainty weighs down on consumer budgets.

Consumers are carrying debt longer. Sixty percent of US respondents with credit card debt have carried it for at least a year—up from 50% a year ago, per a CreditCards.com survey. Younger consumers and those with low incomes are most likely to carry credit card debt because of necessities like groceries, the survey found.
Consumers are leaning on credit cards as inflation bites. The personal consumption expenditures (PCE) price index increased 5.1% year over year (YoY) in September—remaining at the highest levels since the early 1980s. Forty-eight percent of UK, US, and Australian respondents in a Marqeta study said their credit cards have been a “lifeline” for them as the cost of living increased. Sixty-seven percent of US respondents said they were using their cards to make ends meet.
The consumer savings rate is down. US personal savings rate as a share of disposable income dropped to 3.3% in Q3—the lowest reading since the 1940s, per Bureau of Economic Analysis data cited by the Journal. In Q1 2020, that figure stood at 9.6%.

How we got here: Our credit card transaction volume forecast highlights the notable shift in consumer spending throughout the pandemic.

Early pandemic pullback. Many consumers curbed their credit card spending at the onset of the pandemic as financial fears ran high. Total US credit card transaction volume grew a mere 0.6% YoY in 2020, per our forecasts.
Post-lockdown boon. Government stimulus payments, declining unemployment, and easing COVID-19 restrictions gave consumers confidence to pick up their credit cards again. US credit card transaction volume last year surged 21.5% YoY, per our forecasts.

What’s next? We highlight the challenges issuers may face in the event of an economic downturn and how consumers may react in our Era of Uncertainty: Credit Cards report.

Short term. A recession would likely cause credit card spending to drop. Issuers’ losses may rise as consumer lending risks increase.
Long term. Buy now, pay later (BNPL) might steal more market share from credit cards as consumers seek out flexible and interest-free payment options. Credit card rewards may shift to cater to everyday spending categories.

Issuers may want to pivot on travel and non-premium segments, emphasize payment flexibility, and add money management tools to support consumers and minimize their losses.