2020 American Household Credit Card Debt Report
- December 14, 2020
- 10 min read
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2499 reads
Household debt is continuing to grow in America, with credit cards historically being one of the most notoriously difficult and costly to pay off.
However, during the pandemic, credit card debt saw a staggering 13% decrease, more than any other debt category.
In this report, we present 10 unique interactive charts and tables to reveal the most recent trends in credit card debt, based on primary data provided by the Federal Reserve Bank of New York.
Each chart is interactive, allowing you to see its relative numbers/percentages by hovering over each of its components.
2020 Credit Card Debt Interactive Charts
First, let’s see how the different types of debt shifted during the last 3 quarters, using Q4 of 2019 as a point of reference.
2020 Debt Balance Change
20:Q1- 20:Q3, Base point: 19:Q4
Credit card debt had the largest relative change during 2020 among all debt types.
The drastic -12.94% decrease in credit card debt in 2020, comes into direct contradiction with its 9.32% growth in 2019, which was more than double the average total household debt growth.
This extreme volatility of credit card debt within the last two years is more easily understood by looking at the graph of quarterly percentile change for all major debt categories:
Debt Balance Quarterly Change
19:Q1- 20:Q3
It is worth noting that the decrease in credit card debt as experienced in the beginning of 2020 has significantly slowed down in the 3rd quarter.
Despite this, credit card debts reduction in 2020 has been more significant than any other debt category in both relative and absolute terms, as seen in the table below:
Debt Balance Differentials
19:Q4 – 20:Q3
| Debt Category | 19:Q4 ($T) | 20:Q3 ($T) | Change ($T) | Change (%) |
|---|---|---|---|---|
| Credit Card | 0.93 | 0.81 | -0.12 | -12.94% |
| HE Revolving | 0.39 | 0.36 | -0.03 | -7.18% |
| Other Debt* | 0.43 | 0.42 | -0.02 | -3.47% |
| Auto Loan | 1.33 | 1.36 | 0.03 | 2.18% |
| Student Loan | 1.51 | 1.55 | 0.04 | 2.52% |
| Mortgage | 9.56 | 9.86 | 0.30 | 3.18% |
| Total | 14.15 | 14.35 | 0.21 | 1.47% |
Credit card debt has shrunk by $120B during the pandemic, its largest reduction in more than two decades.
Home equity revolving debt, payday loans, personal loans and other smaller personal debt types have also shrank in the same period.
Auto loans, student loans and mortgages, in contrast, have all seen significant increases. Mortgage debt alone increased by $300B.
Surprisingly, mortgage debt account numbers were reduced by more than half a million in 2020, despite the significant rise in mortgage debt.
There was a more dramatic reduction though: Credit card account numbers were reduced by 2.4 million, as seen in the table below.
Number of Accounts By Loan Type
19:Q4 – 20:Q3
| Debt Category | 19:Q4 (M) | 20:Q3 (M) | Change (M) | Change (%) |
|---|---|---|---|---|
| Credit Card | 507.94 | 505.54 | -2.40 | -0.47% |
| Mortgage | 80.94 | 80.44 | -0.50 | -0.62% |
| Auto Loan | 115.98 | 114.49 | -1.49 | -1.28% |
| HE Revolving | 14.99 | 14.13 | -0.86 | -5.74% |
Even though in absolute terms, credit card account numbers had the largest decrease, proportionally it was the smallest, by just -0.47%.
This is due to the historically high number of credit card accounts, which is now twice as a large as all other debt categories combined, indicating the ease in which credit card accounts are created.
The credit card account number bubble is an issue on its own, but the elephant in the room is the consistently higher limits and accumulated debt.
In the chart below, we can see that credit card balance has remained roughly the same within the last two decades, while contrary credit card limits and available credit have both increased by more than 50%.
Credit Limit and Balance for Credit Cards
2003:Q1 – 2020:Q3
This huge discrepancy shows that credit card limits fail to adjust to falling balances, which will likely increase the proportion of delinquent debt in the months to come.
An even bigger warning sign is that between 19:Q4 – 20:Q3 there was a steep -14.87% decline in credit card balance, but surprisingly credit card limits have only decreased by a mere -1.30%.
The mostly stable credit card limits are also in disregard of the rapidly increasing delinquency rates (meaning the percentage of debt that has not been paid in 90+ days), as shown by the graph below.
Percent of Balance 90+ Days Delinquent
19:Q1 – 20:Q3
In fact, credit card debt is the only major debt category that saw a steep increase in the 90+ days delinquency reports, reaching to almost 10% in 20:Q3.
Rising by 16% since 19:Q4, credit cards delinquency rate is now the highest among all other debt categories, surpassing student debt for the first time in recent history.
Student delinquent debt in fact has seen a steep decrease during the last 3 quarters, while mortgage, auto loans, personal loans, payday loans and other debt has remained mostly stable.
Despite its recent increase in delinquency, credit card debt remains in absolute numbers significantly less than auto loans, mortgage and student loans, as shown in the pie-chart below.
Debt Balance per Capita
20:Q3
More than two thirds of all personal debt is attributed to mortgages, which is 12 times bigger than current credit card debt.
However, as we have seen above, credit card debt has almost 14 times higher delinquency than mortgage debt, which raises serious concerns for its sustainability.
Credit card debt and its associated delinquency rate, is also largely affected by age demographics.
Debt Share by Category and Age
$Trillions, 2020:Q3
This graph shows that people aged between 18-29 have less than one-third of the total debt than people in either their thirties, forties, and fifties.
Similarly, people between 18-29 have only an appx. $50B in credit card debt, compared to an average of $170B for either of the three following age groups.
There’s a significant caveat though: The relative distribution of each debt category reveals the higher significance of credit card debt for people in their 20s.
Proportional Debt Share by Product Type and Age
Percentage, 2020:Q3
For people aged between 18-29, the proportion of credit card debt to total debt, ranges from 70% to more than 100% higher than all other age groups.
This further shows the reliance of young people on credit card debt, which is accompanied by much higher delinquency rates, as shown below.
Serious Delinquency Rate for Credit Cards by Age
Percentage, 2020:Q3
Serious delinquency here is defined as overdue payments for more than 90 days.
Despite their recent sudden drop, delinquency rates for people between ages 18-29 are 46% higher than the average of all other age groups.
Even though this statistic raises concerns, it is a significant improvement since Q4, 2019 where youth credit card delinquency rates were 76% higher than the average.
Summary
We have seen that credit card debt has the highest variance among all other debt categories, and contrary to expectations experienced a 13% decrease in 2020.
Credit card account numbers are more than twice as large as all other debt account numbers combined.
There are several warning indicators for a credit card debt bubble, such as the -14.87% decline in credit card balance in 2020, while credit limits stayed mostly stable.
Credit card delinquency rates have risen by 16%, now surpassing all other debt, including student debt.
For people aged between 18-29, the proportion of credit card debt to total debt ranges from 70% to more than 100% higher than all other age groups.
Credit card delinquency rates for people aged between 18-29 is 46% higher than the average.
References
Graphs, secondary data and analysis: Financer.com
Primary data: Federal Reserve Bank of New York
If you want to share this report, please don’t forget to give credits to both sources.
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What do you think about the latest trends in credit card debt? How do you see this changing in 2021? Add your comments below!
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