U.S. credit card balances surpassed $1 trillion over the summer, driven by a post-pandemic return to normal spending habits, according to a report published by the Government Accountability Office (GAO). The milestone comes as federal student loan and mortgage payments resume, prompting federal watchdogs to examine the demographic disparities in credit limits and interest rates.
Pandemic Relief and the Drop in Revolving Debt
During the COVID-19 pandemic, consumer credit card usage dropped significantly as federal relief programs injected funds into household budgets. According to the GAO report, the federal government distributed multiple stimulus checks, advance child tax credit payments, and expanded unemployment insurance between April 2020 and December 2021.
The GAO estimated that cardholders increased their credit card payments by an average of $20 and $61 when the second and third stimulus checks were disbursed. Payments increased by an average of $37 each month when advance child tax credit payments arrived. These actions helped reduce the share of active accounts carrying a monthly balance from 50% prior to the pandemic down to 45% by December 2021.
Furthermore, late payment and default rates fell to historic lows during this period, particularly for consumers with credit scores below 620, according to federal data.
The Return to Pre-Pandemic Debt Levels
With pandemic-era relief programs expired and standard economic obligations reinstated, credit card usage has climbed back toward historical averages. Over the summer, total U.S. credit card balances exceeded $1 trillion. The GAO noted that in the pre-pandemic years between 2013 and 2019, approximately half of active credit card accounts carried a balance from one month to the next.
Carrying a revolving balance was not restricted to lower-income households. Federal findings show that even cardholders with credit scores above 720 and household incomes exceeding $150,000 frequently carried debt from month to month. Many cardholders owed more than $1,500, with balances maintained for at least a year, while up to 11% of revolving cardholders reached or exceeded their credit limits in a given month.
Demographic Disparities in Credit Terms
The GAO report also examined variations in credit terms across different communities. Analysis of a large sample of cardholders indicated that credit terms in majority Black or African American and Hispanic or Latino zip codes were less favorable than those in predominantly White zip codes.
According to the GAO findings, cardholders residing in majority Black and Hispanic zip codes faced lower credit card limits and paid higher interest rates on average. Various economic factors influence credit limits, but the federal review highlighted persistent gaps in borrowing costs and availability across racial demographics.
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