There are signs that consumers are bringing credit card debt under control and are beginning to make strides to pay it off along with other debts like automobile loans.
Moody’s Investor’s Service reports that the charge-off rate by banks for bad consumer debts decreased from 10.76 percent in June 2019 to 10.52 percent in July.
Also, delinquencies that had been on a steady increase have also begun to decline. The Federal Reserve has issued statements that show that there is a positive move by consumers to paying down their debts as well.
Retailers are hoping that this bodes well for the holiday shopping season. It appears that more families have discovered ways to manage their debt and make strides to pay it down. Other studies are validating this trend. Consumers are also increasing their savings rates at levels not seen in years.
With unemployment and underemployment still major issues, the positive effects will probably not be wide-reaching, but it is better than the opposite.
The best way to view this information is to realize that families are in a better position to make a comeback when things do improve.
This is not good news, however, for credit card companies who are beginning to feel the pinch of fewer and fewer people using their credit cards for purchases and instead paying with cash via debit cards or using tactics like layaways at retailers to fund their purchases.
The door to economic recovery is opened but just slightly for the moment. The recovery is fragile and might still be a ways away before it grows stronger.