Coronavirus Economy: As Recession Looms, Polls Show Americans Cut Spending Amid Rising Credit Card Debt

With an average credit card balance of more than $9,000, more than half of Americans say they have cut spending as a result of the coronavirus pandemic, taking steps to preserve their finances with the threat of layoffs and permanent job losses looming.

The New York Federal Reserve reported last month household debt hit $14.15 trillion in the fourth quarter of 2019, eclipsing the pre-Great Recession peak of $12.78 trillion. Credit card debt totaled $1.07 trillion, with the average household shouldering $9,070 and the delinquency rate already trending higher.

A poll by CreditCards.com indicated 59% of Americans, about 110 million people, went into the coronavirus pandemic with credit card debt, including 66% of Gen Xers and millennials (ages 24-55) and 57% of baby boomers (ages 56-74).

“The coronavirus outbreak is unfortunate proof that circumstances can change in an instant,” CreditCards.com analyst Ted Rossman said. “What many believed was manageable credit card debt has suddenly turned into a situation of uncertainty.”

Thirteen percent of the 2,526 adults queried by YouGov March 4-6 said medical bills were the reason behind their debt, while 12% blamed car repairs and 10% blamed home maintenance expenses. A full 26% said their debt was the result of day-to-day expenses like groceries, child care and utilities.

Thirty percent said their debt was the result of retail spending or vacations.

Nearly half of those queried (49%) said they were worried about what comes next.

“Many adults were already teetering on the financial edge, reliant on credit cards to pay for day-to-day bills and emergencies at the start of the COVID-19 outbreak,” Rossman said. “Credit card rates remain very high, over 17% for many cardholders, and Federal Reserve interest rate cuts won’t provide much relief.”

A separate poll by Bankrate.com indicated 47% of Americans said they have reduced spending since the pandemic hit because they’re worried about the economy, which Federal Reserve Chairman Jerome Powell has said likely already is in recession. The percentage rises to 52% among those 35-54 and those living in the Northeast, which has become an epicenter for the U.S. outbreak. Just 15% said they changed their spending because of the stock market plunge from an all-time high.

“More than two-thirds of U.S. economic output is tied to consumer spending, and most Americans are actively cutting their spending due to pervasive worries about the COVID-19 impact on the economy and stock market,” Greg McBride, chief financial analyst for Bankrate.com, said in a press release. “Take this as validation of a U.S. economic recession.”

He noted that though Americans have cut spending, two-thirds (66%) said they have not bailed out of the stock market, preferring to ride out the downturn in their retirement or investment accounts.

YouGov conducted the Bankrate.com poll March 20-24, querying 2,486 adults.