Economic News
Americans Paid Down $56.5 Billion in Credit Card Debt During Q1 2021
Even as the United States economy continued to be weighted down by the pandemic, many Americans still managed to pay down a significant amount of their household credit card debt. According to the latest data from the personal finance site WalletHub, U.S. consumers cut a total of $56.5 billion in credit card debt during the first quarter of the year.
This sum was 51% more than the first quarter average observed since the Great Recession. What’s more, this comes after a record-setting year that saw $82.1 billion in debt erased, bucking a trend that has seen credit card balances grow by an average of $45.6 billion per year for the past decade.
Despite the 2020 and Q1 2021 paydowns, the total amount of consumer credit card debt in the country still totals nearly $900 billion. This amounts to an average household balance of $7,519. Furthermore, with the first quarter in the books, WalletHub now anticipates that Americans will end 2021 with $60 billion more in credit card debt than they entered the year with.
Looking even closer at the first quarter data, WalletHub also highlighted the cities that saw the largest payoffs as well as those cities on the other end of the spectrum. Topping the list was Santa Clarita, California where the average household paydown during the quarter amounted to $1,248. This was followed by New York, New York ($1,143); Chesapeake, Virginia ($1,126); Chula Vista, California ($1,124); and Pembroke Pines, Florida ($1,119). Meanwhile, Detriot saw the smallest average household paydown, amounting to $547. Fellow midwestern city Madison, Wisconsin came in 181st with a $561 average, followed by Lewiston, Maine ($563); Cleveland, Ohio ($572; and Toledo, Ohio ($576).
Commenting on the overall Q1 figures, WalletHub analyst Jill Gonzalez remarked, “The newest data on credit card debt indicate that U.S. consumers are in good shape financially,” adding, “It’s common for credit card debt to drop during the first three months of the year, but the drop we observed this year is the second largest ever, so we’re definitely on a strong trajectory.” Turning toward the future and why the site still expects to see an increase in debt for the year, Gonzalez explained, “It’s hard to imagine a scenario in which debt would not increase somewhat in the short term as the economy continues to reopen, extra unemployment benefits roll back, and consumers make up for lost time when it comes to spending.”
Ultimately, while it’s far fetched to think that consumers will be able to suddenly turn things around and erase their credit card debts entirely, there are reasons to believe that the pandemic experience may have left some Americans with some important financial lessons. Of course, financial realities take precedent over those lessons, which is also why it’s important to remember that these figures don’t tell the entire story. Nevertheless, it’s always encouraging to see consumers moving a bit closer to being debt free — even amid some truly challenging times.
