PHOENIX (3 On Your Side) – In 2020, Americans paid off a record $ 83 billion in credit card debt, and a new report reveals two Arizona communities were on the top 25 list for debt repayment.
According to WalletHub 2021 Credit Card Debt Study: Trends and Perspectives (wallethub.com), this is only the second time in 35 years that Americans have ended the year with fewer credit cards than at the start of the year.
“It’s a big deal,” said Jill Gonzalez, analyst for WalletHub. “In 2020, we saw the biggest refund ever from consumers.”
But there is still a long way to go. At the end of 2020, the average household credit card debt was $ 8,089, which is almost $ 1,000 billion.
Households in Gilbert, Arizona nearly doubled the national average credit card debt, but consumers there also paid off more debt than most, ranking 21st on WalletHub’s list for debt repayment. Peoria was just behind in 23rd place.
“A lot of the cities in the top 25 are one or the other of two things,” Gonzalez said. “They’re more of a low-income community where we see the credit card debt is lower, but that being said, the payoff was always a bigger part of that debt, or we see it on the richer side, income. higher in communities like Gilbert who have higher credit card debts to begin with, but who are able to support them with higher incomes and who have still paid a good chunk this year. ”
According to a WalletHub survey, 2021 Credit Cards: Get Credit Card Approved Today (wallethub.com) about 35% of Americans said the COVID-19 pandemic prevented them from seriously taking on credit card debt. Federal stimulus money has also played a role in paying down debt, but the trend may not continue.
“When we surveyed people, about 1 in 10 Americans said that as soon as the economy fully reopens, they plan to go shopping, so unfortunately I don’t see that momentum going on for long, but it was definitely an economy. thanks in 2020, ”Gonzalez said.
Richard Rosen, a professor at the University of Arizona who focuses on personal and family financial planning, says he also believes some people will start taking on debt again, but is encouraged by the progress.
“It’s drastically down. It’s a really positive thing, but time will tell,” Rosen said. “After a year, which I hope – and it won’t be for everyone – but there will be a fair number of people who will realize,” I didn’t really need to spend that money and I was used to pay off my credit card. Maybe if I can stick with that, I can pay a little more for it, so when an expense pops up, I can pay it. ‘”
Rosen used to recommend an emergency fund that could cover three to six months of expenses. He says it can still work for people with stable jobs, but he believes concert workers after the pandemic should have more than six months of spending saved.
“I can’t tell people enough that you need this emergency fund,” Rosen said. “If the last 12 months haven’t proven it to you, I don’t know what it’s going to take.”
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