Credit card demands are skyrocketing to pre-pandemic levels, but could inflation affect repayment?

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U.S. credit card applications have returned to pre-pandemic levels, a trend that bodes well for the economic recovery, but could backfire if soaring inflation affects consumers’ ability to repay debt .

According to a recent survey by the New York Fed, the credit card application rate increased throughout 2021, reaching 26.5% in October.

This is 10.8 percentage points higher than a year ago, which was a record low of 15.7% amid the decline in spending in the first months of the pandemic.

Just over 11% of Americans also requested credit card limit increases in October, a rebound from around 7% for the same months last year and just under 12% in October 2019, months before the pandemic, according to the bank’s Center for. Microeconomic Data Survey.

The report also says demand rates for all types of credit returned to pre-pandemic levels throughout 2021, after dropping 11 percentage points to an all-time high in October 2020.

The survey also shows that American households expect to apply for more of various types of credit in the future, including mortgages, credit cards, limit increases and auto loans.

For example, 12% of those polled said they were likely to apply for a credit card in the next year, up from 8.3% a year ago, while nearly 7% said they were planning to apply for a credit card limit increase over the next 12 months. , compared to 5.8% in October 2020.

Banks were increase their marketing budgets to encourage more consumers to subscribe to credit cards and loosening of borrowing restrictions and offer travel rewards for other promotions.

The concern is whether consumers fully understand what they are register for some credit cards.

For example, a WalletHub A survey of over 300 American consumers shows that 56% of Americans don’t know how deferred interest credit cards work.

Lack of knowledge, The Street reports, could result in a large bill later if you pay a bill a month late, or even owe as little as $ 1 at the end of the promotional period.

Americans have an average of 2.33 retail credit cards and an average balance on those cards of $ 1,887, according to Experian’s 2021 Credit Status Report.

The report also notes that consumers are managing their credit well, with the average credit score rising seven points since 2020 to 695, the highest point in more than 13 years.

Yet not all consumers track their credit card payments: a recent NerdWallet survey found that 29% of consumers who placed Christmas presents on a credit card last year still haven’t paid their balance.

The survey of around 2,000 Americans also shows that three-quarters of vacation buyers this year will use credit cards to pay for gifts, charging an average of $ 620.

The New York Fed recently said that total household debt rose nearly 2% or $ 286 billion to $ 15.24 trillion in the third quarter of 2021.

Credit card balances increased $ 17 billion, the same increase as in the second quarter and $ 123 billion lower than at the end of 2019.


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