Credit card balances dipped by most ever

U.S. credit card balances fell by the most on record last year even as households increased their total debt by taking on new mortgages, the Federal Reserve Bank of New York said.

Total debt rose by $206 billion in the fourth quarter, bringing the annual increase to 3 percent to set a record of $14.56 trillion, the data show. Home loans, which increased 5 percent last year, crossed the $10 trillion threshold for the first time. Credit card debt rose slightly in the fourth quarter, but ended the year down 12 percent from 2019, the largest annual decline ever in data analyzed by the New York Fed. Late payments also fell.

The changes in household debt reflect the topsy-turvy nature of 2020, when record-low interest rates fueled a surge in mortgage refinancings. At the same time, millions of households were set back by mounting joblessness and an increase in hunger.

Credit card balances fell because households reached for their debit cards first and spent much of the year paying down unsecured debt. Delinquency rates dropped to 3.17 percent, in large part because Congress and lenders allowed borrowers to postpone required monthly payments.