Americans increased their borrowing to a record $ 14.6 trillion in March, thanks to home and auto loans.
But the growth masked what researchers at the Federal Reserve Bank of New York called a “puzzling” drop in credit card balances in a quarter when retail sales soared and travel. resumed.
The New York Fed’s report, the first look at household balance sheets as the economy began to rebound from the pandemic, shows mortgage, auto and student loan balances continued to rise. The same goes for the quality of new borrowers, many of whom took advantage of low interest rates to refinance their home loans.
Credit card balances fell $ 49 billion in the first quarter, the second largest quarterly decline since data began to be compiled in 1999 – the largest occurred in the second quarter of 2020, when the business activity has been frozen by lockdowns.
An influx of government pandemic relief money and payment moratoria on student loans and other bills have allowed people to pay off their credit card balances for months now. Still, the magnitude of the decline in the first quarter is “remarkable” in light of the strong economic recovery, the Fed researchers wrote.
“The surge in retail sales volumes suggests that a combination of stimulus, increased consumer confidence and pent-up demand are supporting consumption and also helping borrowers reduce revolving debt balances,” said Andrew Haughwout, senior vice president of the New York Fed.
Credit card balances are now $ 157 billion lower than they were at the end of 2019, before the Covid-19 health crisis hit.
Americans have a record $ 3.07 trillion available on credit cards – adding to the resiliency of household budgets to fuel emergency spending when needed.
While credit card cuts are happening across the board, older borrowers and those living in high-income areas have seen the steepest declines, according to the report.
However, older Americans, aged 60 and over, took out a record number of new mortgages in the last quarter, according to the report, possibly reflecting early retirements as they migrate to new regions or elderly people supported by stock market earnings allowing many to buy a second home.
Auto loans hit a record $ 1.38 trillion last quarter and are increasingly being extended to Americans with high credit scores.