U.S. consumers continue paying off credit cards on time amid elevated inflation: BofA
Yahoo Finance's Brian Cheung discusses the chart of the day, showing credit card payments are holding up despite economic uncertainty.
Video Transcript
BRIAN CHEUNG: All right, time now for our Chart of the Day. And we want to highlight what has been essentially a very weird economy. Because on one hand, the American consumer is getting squeezed big time on price increases. But on the other hand, we're not seeing a huge issue yet in credit health of the American consumer. This comes from Bank of America's earnings yesterday and shows credit card balances on cards past due by over a month, about 30-plus days, actually were below pre-pandemic levels.
Again, 2019, we saw past due credit cards much higher. Only about 1.2% of credit cards, at least for Bank of America, are delinquent. And, Akiko, this really underscores that even in this weird environment where people are worried about the R word, recession, the ability to repay, at least for American consumers, is still very much there.
AKIKO FUJITA: So I guess the two follow-ups here is, how much are they spending? And also, how much of this is being able to tap into the savings that we've been talking about over the last few years, that they have a few reserves here, a little reserve to be able to pay down that credit card?
BRIAN CHEUNG: And the savings, I think, is the big story there, right, because we know that savings rates have come down as of late. The amount of your paycheck that you're saving can't be nearly as high as it was last year because the high impact of inflation is eroding a lot of that. But because of the stimulus checks and just the bank balance increases that we had when everyone was stuck inside, not spending on anything, they're starting to tap into that to pay down their credit card loans.
And I think that that was a big story, by the way, why we saw this massive decline here as people who couldn't go outside, well, they just used the money that they had to maybe pay off outstanding due balances on their credit cards or other types of loans. So very interesting story that we'll continue to watch. Maybe this starts to tick up as the recessionary fears continue to weigh on American consumers. But.
