Credit Card Payments Down 25% During COVID-19 Pandemic

On March 11, 2020, the World Health Organization declared COVID-19 a worldwide pandemic. Shortly after, the vast majority of the U.S. economy was shut down, outside of essential businesses and services.

As of this writing, only 41% of U.S. businesses report being fully open, while 20% remained closed or have closed permanently.

More than 30 million Americans (about 20% of the U.S. workforce) are unemployed. And those Americans who are still working live in fear that they could be laid off at any time.

It’s not hard to imagine that the current economic landscape — one in which most businesses cannot fully operate, and one-fifth of the workforce is unemployed — has led to a widespread change in how Americans are managing their money. This brings up interesting questions:

How and where have they been spending their money? Are they spending money? Have they been struggling to keep up with making payments? How much are they spending on things like food and transportation?

The Congressional Budget Office released a report recently that projects that it will take until 2030 for the unemployment rate to drop to 4.4%. Experts at The Balance are projecting as much as a 50% drop in the U.S. GDP growth rate.

In short: It doesn’t look good. But just how bad is it?

Overview of Spending During COVID-19

Before we dig into specific industries, want to take a high-level look at how people are spending, in general, during the COVID-19 pandemic. We looked at credit card spending, credit card payments, and ATM withdrawals to see how people were spending or not spending, and how often they were spending.

Credit Card Payments Dropped by 25%

One way to look at how the U.S. economy and American citizens are doing amidst the COVID-19 pandemic is by looking at how they are managing their debt. With unemployment numbers steadily growing over the last six months and the end of the pandemic nowhere in sight in the U.S., payments to credit card companies such as Mastercard (MA), Visa (V), American Express (AXP), and Discover (DFS), are a strong indicator of what spending trends may look like as we dig further into the date below.

Credit card payments saw a negative arc in 2020. They started up from December in January 2002, then quickly dropped off as news of COVID-19 hit the mainstream media starting in February.

There was a slight increase (1.2%) in payments from February to March. It’s possible that consumers — perhaps worried about their economic outlook — were attempting to pay down some debt before things got worse.

And while credit card payments were up from April in May and June, credit card payments are still down 22% or more for the last three months.

Credit Card Spending Dropped by 34%

The next thing we looked at was how people were spending with credit cards at a high level. People’s overall credit card spending should be another pretty indicator of what to expect when we drill down further.

In January 2020, overall credit card spending was up by ~1% (from Dec. 2019). From there, it follows the same negative arc as credit card payments did.

March saw credit card spending drop concurrently with the World Health Organization declaring COVID-19 a global pandemic. As a result, the U.S. economy all but closed and credit card spending dropped to -34.17% of what it was in December 2019.

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Alexandra Gray 2 months ago Member's comment

Some sobering data here.

Moon Kil Woong 2 months ago Contributor's comment

So much with the hypothesis that cash is dead, or that credit cards and the 1,000 other fractured payment systems prone to fraud including crypto currencies will do great under Covid. Stocks and assets have risen and that is pretty much all as people realize capitalism favors hoarding assets. Monetary grease has replaced elbow grease.