• Market Crumbs

Americans Pay Off Record Amount Of Credit Card Debt


Image via Avery Evans on Unsplash

With little to do for the most part of 2020 as a result of the coronavirus, it would make sense that Americans paid down their credit card debt last year.


Personal finance website WalletHub released its quarterly credit card debt study earlier this week, finding that Americans paid off a record $82.9 billion in credit card debt in 2020. WalletHub calls the feat "a major accomplishment" as they note Americans have averaged $54.2 billion in new credit card debt per year over the past 10 years.


Last year was only the second instance in the last 35 years that consumers ended the year with a lower total credit card balance than they began with, the other instance being in 2009 at the height of the recession.


Using data on Americans' finances from TransUnion, the Federal Reserve and the Bureau of Labor Statistics, WalletHub's study has some interesting findings.


Americans owe nearly $1 trillion to credit card companies as the average household credit card balance remains just over $8,000. Despite paying off a record amount of credit card debt last year, Americans actually added $36.7 billion in credit card debt during the fourth quarter alone amid the busy holiday shopping season.


Compared to the end of 2019, total credit card debt decreased by 10.8% to $955.4 billion from nearly $1.1 trillion. The average amount of credit card debt per household fell by 12% over the same period to $8,089 from $9,193.


WalletHub's suggestions for managing credit card debt includes making and sticking to a budget, building an emergency fund of a year's worth of after-tax income, repaying your most expensive debt first and trying the "Island Approach," which is a strategy using various credit cards, with each serving a specific purpose.


"A short-term burst of spending is inevitable," WalletHub analyst Jill Gonzalez said. "The question is which way the pendulum swings in 2022 and beyond. My hope is that consumers will internalize lessons learned during the pandemic and showcase a newfound frugality."


Despite hopes consumers will pay off credit card debt the way they did last year, WalletHub doesn't expect a repeat of 2020 as their early projection for credit card debt in 2021 is that U.S. consumers will add about $50 billion to their total balance.


Leftover Crumbs

  • SPAC deal volume tops 2020's total. According to data provider Refinitiv, the global deal volume attributed to mergers with SPACs has already passed 2020's total so far this year. Deals announced by SPACs have hit $170 billion this year, outpacing last year's record $157 billion. Refinitiv data shows the sectors most commonly targeted by SPACs include automobiles, software and aerospace as this year's largest SPAC deals so far include Lucid Motors, Alright Solutions and Fertitta Entertainment. Just over $62 billion of this year's total has been raised by U.S.-based SPACs.

  • SoFi takes steps towards national bank charter. SoFi has made a "key strategic step" in its quest towards obtaining a national bank charter by agreeing to acquire Golden Pacific Bancorp. SoFi will pay $22.3 million in cash for Golden Pacific Bancorp, which is a community bank with approximately $150 million in assets. "We believe that by pursuing a national bank charter, we will be able to help even more people get their money right with enhanced value and more products and services," SoFi CEO Anthony Noto said. "We are thrilled to have found a partner in Golden Pacific Bank to both accelerate our pursuit to establish a national bank subsidiary, as well as begin to expand our offerings in SoFi’s financial products and Galileo’s technology platform to serve local communities."

  • Chipotle launches quesadilla but there's a catch. Chipotle announced it will introduce a quesadilla as a digital-only menu item on March 11 following a successful pilot test in Cleveland and Indianapolis last summer. The quesadilla is the first new customizable entrée to be added to Chipotle's menu since a salad option was introduced 17 years ago. "We're so excited to answer the call from fans and introduce one of the most highly anticipated menu items in our brand's history," Chipotle Chief Marketing Officer Chris Brandt said. "The Hand-Crafted Quesadilla brings so many new possibilities to our menu, and fans will love exploring fresh flavor combinations through its sides and salsa options."

  • Callaway completes merger with Topgolf. Callaway Golf Company and Topgolf International completed their previously announced merger to create a tech-enabled company focusing on golf equipment, apparel and entertainment. "Callaway and Topgolf are just better together," Callaway President and CEO Chip Brewer said. "Callaway's leadership in the global golf equipment market and geographic diversity, combined with Topgolf's revolutionary technology platform and access to golfers of all abilities, will allow both companies to accelerate growth and create competitive advantages."

  • Dropbox acquires DocSend. Dropbox announced it has agreed to acquire DocSend, which counts more than 17,000 customers using its document sharing and analytics product, in a $165 million cash deal. The acquisition will enable Dropbox to offer a full suite of products to manage document workflows. "With the sudden rise in remote work, teams are more distributed than ever, bringing new challenges to content collaboration. It's harder to stay organized, and information is scattered across disparate files, teams, and tools," Dropbox said. "As a company trusted by more than 700 million users around the world, we adapted quickly to this new environment, and reoriented our product roadmap to address the challenges of distributed work for our customers."