“A Generation of Savers:” The pandemic has reduced our credit card debt. Will it stick?

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During the pandemic, credit card debt and delinquency in credit card payments fell sharply, especially in Wisconsin, according to a new report.

Analyzing data from the Urban Institute, researchers at LendingTree found that credit card delinquency in Wisconsin fell 31% from February 2020 to October 2020. Additionally, the number of people with bad credit scores at risk has decreased by 15%, the number of people with delinquent student loans has decreased. by 38% and the median amount of debts collected fell by $ 148.

All of these statistics made Wisconsin the state with the second largest improvement in debt during the pandemic, behind only Minnesota.

LendingTree Senior Research Analyst Nick VinZant said a “trifecta” of factors led to debt reduction and improved credit scores: federal stimulus payments, pause in debt payments. student loans and lockdowns that prevented people from going out and spending in restaurants, bars and other social activities.

Renae Sigall. Photo provided.

Locally, Renae Sigall, branch manager of UW Credit Union, agreed on at least one driving force in the data.

One thing that has impacted me and a lot of people around me is the fact that we don’t have to make student loan repayments, ”she said. “Given the high amount of debt that many of us live under, a significant amount of money is freed up in our budget. “

In December, President Joe Biden extended the deadline for paying off student loans until September of this year.

Sigall said changes in the way we shop have also reduced impulse buying.

“A lot of people order their groceries online, and you can really think about what’s in your cart, rather than just going down the aisles and throwing things out,” she said.

VinZant acknowledged that things weren’t getting better for everyone.

Throughout the pandemic, it accelerated trends that were already there. The haves have more and the have-nots have less, ”he said, due to a sharp and sudden increase in unemployment and other factors.

In addition, there were racial disparities in the data. “WPopular communities generally tended to do better than communities of people of color, ”VinZant said. “Not much different, usually a few percentage points, but white communities generally seemed to bounce back faster than communities of people of color.”

For example, nationally, the number of blacks with bad credit scores decreased 9% while the number of whites with bad credit scores decreased 11%.

LendingTree chart.

Yet an unexpected number of people across the spectrum have been able to take a “breath” of reducing debt, putting money into savings, and generally building a stronger financial foundation.

Will it stick?

The sharp drops in debt and delinquency over a relatively short period raise the question: will these changes last?

“Once you’re out of the hole, you’re out of the hole. And that might be the hardest part is getting out of it, ”VinZant said. “And (the pandemic) really gave people a break, where they could catch up. It costs a lot of money not to have a lot of money. Because then you pay more for a mortgage. Your payment by car is more expensive, your payment by phone is more expensive.

But having a little extra cash during the pandemic may have helped some people break that cycle, he said.

It’s hard to say how permanent these changes are, said Park Bank senior vice president of credit Ryan Shea.

“We’re in the cycle right now where we still don’t know everything that’s on the horizon. And maybe there are different concerns economically. But a lot of people are in a good position where they hit the reset button, ”he said. “One thing that this pandemic has taught me and almost everyone is that, whatever you guess, or whatever you think is going to happen, you never know. “

Sigall is optimistic, noting that habits have changed for almost two years now.

What comes to my mind is the intrinsic reward or emotional feeling of getting out of debt and how liberating it is, and what results is less stress and a change in behavior. overall, ”she said.

I think we’ll have a generation of savings, ”she added, which means less living paychecks and less reliance on credit cards. “It’s my own prediction.”

Suzanne Johnson. Photo provided.

Park Bank Branch Senior Vice President Suzanne Johnson said talking to someone at your bank could help keep you in a better place.

I think the advice is to have a strong relationship with your banker because I think everyone has financial goals that they want to achieve, ”she said. “We are working on training our associates to look for opportunities “to earn more interest on savings or find lower interest rates on loans.

She said it might be worth calling a banker to discuss things when there aren’t any big expenses looming.

“Just having this discussion before I get to the immediate need is my recommendation,” she said. “Sometimes (if there’s a) immediate need, we make really quick decisions, instead of proactively thinking about… financial goals. “

I would say maintain discipline because like any habit you have to stick to it, ”Sigall said. “Create a budget. No one likes working on a budget, but it should be seen as a tool to use in managing your money. And have a plan and start saving for goals that are really important to you.

The Lasting Impacts series is funded by a grant from the Wisconsin Department of Health Services.

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