After pulling back on borrowing during much of the pandemic, Americans are ready to pile on the debt as they edge closer to their pre-pandemic spending ways, according to recent figures.
“It’s what we do,” said Matt Schulz, the chief credit analyst at Lending Tree, a loan marketplace. “Credit card debt only falls in times of major economic catastrophe in this country. Outside of those times, it basically grows steadily.”
Nearly 27% of Americans said in October that they had applied for a credit card in the past 12 months, according to the Federal Reserve Bank of New York, which marks the highest level since 2019 and is up from the 15.7% low recorded in October 2020.
Americans’ appetite for mortgages and auto loans also grew, according to the survey conducted last month. (The survey didn't capture any effects from the Omicron variant.)
The figures echo earlier Fed data showing credit card balances growing in the second and third quarters of 2021 after five previous quarters of declines when Americans reined in spending during the pandemic, received generous income boosts from government support, and paid down debt.
Part of the recent penchant for borrowing may come from stable household budgets. The savings rate among Americans surged during the pandemic and remained above pre-pandemic levels until October when it hit 7.3%. And housing values and the stock market continue to grow, helping many to feel wealthier.
Credit card companies are also dangling better offers — a trend that popped up in late spring after vaccinations ramped up and Americans felt more confident to spend like they used to.
“After sitting on their hands for some time, lenders are definitely back in the game, no question about that,” Schulz said. “We’ve seen bigger sign-up offers, better balance transfer offers. They’re throwing big offers out there to get new customers.”
So far, credit card delinquencies remain below pre-pandemic levels, Schulz said, suggesting that Americans are having no problem keeping up with their new debt obligations — at least for now.
“None of that will last forever. Once the dust clears from the holiday season, we’re going to see a little more debt, a few more delinquencies, and a few more people struggling with debt,” Schulz said. “It’s only a matter of time.”