Credit Card Debt Drops Sharply as Consumers Cut Back

U.S. household debt decreased by $34 billion to $14.27 trillion in the second quarter of 2020, marking the first decline since the second quarter of 2014. While many may have expected debt levels to rise amid the pandemic, the drop-off in consumer spending during the lockdown actually resulted in an unprecedented drop in credit card debt, which more than made up for a $63-billion increase in mortgage debt.

As the following chart shows, outstanding credit card debt dropped by $76 billion in the three months ended June 30, marking by far the largest decline on record. The previous record had been set in the first quarter of this year, when outstanding credit card debt had declined by $34 billion due to seasonal effects exacerbated by early signs of decreased consumer spending due to COVID-19.