One unexpected effect of the COVID-19 pandemic is that it has shored up the nation’s wallets.
Suddenly unable to eat out or travel in 2020, consumers reduced spending and used pandemic relief payments to cut their credit card debt. Credit card balances fell a collective $108 billion in 2020, the largest annual decline since tracking began in 1999, according to the Federal Reserve Bank of New York.
Of course, reining in credit card spending in a locked down world is relatively easy. As Americans begin to regain some freedoms, the question remains: Will this newfound frugality last? These five credit card habits that emerged during the pandemic are worth keeping.
If you eliminated credit card debt during the pandemic, now is not the time to start spending again. Instead, continue to emphasize saving rather than spending.
The coronavirus pandemic created both a health crisis and an economic crisis that led to the loss of millions of jobs and caused Americans to tighten their purse strings and save more. In fact, households went on an “unprecedented saving spree,” according to the Federal Reserve Bank of Kansas City, Missouri.
Savings as a percentage of disposable personal income leaped from 7.2% in December 2019 to a record high of 33.7% in April 2020. In just one month – March to April 2020 – the savings rate nearly quadrupled.
As 2021 dawned, Americans had done such a good job of paring down their spending that many were awash in cash. In fact, half of Americans who received a stimulus check in March 2021 said they planned to use it to pay down debt, according to a LendingTree report.
Putting money into savings is wise because it helps you enjoy life with more security and less stress, especially when emergencies arise, says Lauren Greutman, financial coach and author of “The Recovering Spender.”
“There isn’t the fear that if something happens, your life will fall apart,” Greutman says.