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How Credit Card Companies and Consumers Have Reacted to the COVID-19 Pandemic

Posted on in Debt Collection

Chicago debt collection attorneysAccording to the August report from the U.S. Federal Reserve, the amount of unpaid credit card debt in the U.S. has been dropping since the start of the COVID-19 pandemic. Outstanding consumer credit card debt in July was reported as $994.7 billion, which is down from $996.8 billion in May and $1.078 trillion in Quarter 1 of 2020. Declining credit card debt is a predictable response to a downturn in the economy. In fact, both consumers and credit card companies have changed their behavior because of the pandemic

Consumers’ Approach to Debt Has Changed

Millions of Americans lost their jobs, were put on leave, or had their hours reduced in response to the COVID-19 outbreak. When consumers are uncertain about their job income, many will become more risk-averse about taking on credit that they may not be able to repay. The pandemic affected the activities of cardholders in several ways:

  • Many stores where consumers might use their cards were closed for weeks or months because of state mandates.
  • Consumers are staying at home more often, which means they spend less on travel and dining.
  • Most consumers received stimulus payments from the federal government, which some used to pay down their credit card balance.

How Credit Card Companies Have Adjusted

Credit card companies have also responded to the economic effects of the pandemic to protect themselves and help their clients. Many companies are working with existing customers who are facing an unexpected economic hardship that makes it harder for them to make monthly payments. Companies can provide relief by modifying the debt agreement to reduce monthly payments and interest rates or to waive late fees.

As far as new clients, some credit card companies are being cautious by raising the credit rating they are looking for before issuing a card. Because of the uncertainty of the economy, there is a greater risk that a client’s financial standing may suddenly change, making them unable to repay their debt. Being more selective with new clients may mitigate some of that risk.

Contact an Illinois Debt Collection Attorney

When your client is not making their required credit card payments, you need to act quickly to recover the money owed to you. An experienced Chicago debt collection lawyer at Walinski & Associates, P.C., can give you more options for retrieving debts than a debt collection agency, whether it is negotiating with the client or filing a lawsuit. Schedule a consultation by calling 312-704-0771.

 

Source:

https://www.cardrates.com/advice/how-the-pandemic-is-affecting-credit-card-debt/

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