By Chris Taylor

NEW YORK (Reuters) – Early in the pandemic, there were encouraging and surprising signs about the decline of credit card debt.

That trendline appears to be on the verge of changing.

Many Americans were at home during COVID-19, and they didn’t spend as much as usual. These individuals also received emergency cash assistance that helped them to cut down on their credit cards bills.

Spending is ticking back up – and the results are starting to show up on our monthly statements.

According to Bankrate.com’s new survey, 42% (or 59,000,000 Americans) have increased their credit card debt since the start of the pandemic.

“Things are better for some, but they are not better for everybody,” explains Ted Rossman, Bankrate’s senior industry analyst.

Rossman stated that ending stimulus checks and expanding unemployment benefits as well as the moratorium on evictions does not bode very well for debt management.

The Federal Reserve Bank of New York’s most recent statistics reflect this trend reverse. Its Quarterly Report on Household Debt and Credit found that credit-card bills rose by $17 billion in 2021’s second quarter, to $790 billion nationally. After four quarters in decline, this was the first increase.

Auto loans increased by $33Billion in this quarter and mortgage debt rose by $282Billion. The total household debt is $14.96 trillion. That’s a rise of 2.1% in quarterly terms.

DIFFERENT DEBT, DIFFERENT STRATEGIES

Of course, not all debt is the same, nor should it automatically be considered a bad thing. The rise in mortgage debt can be attributed to many people buying homes in a hot real estate market – and with interest rates near historic lows, that is not necessarily a concern for household balance sheets.

However, credit card debt can be particularly dangerous. It can be very challenging to escape as balances rise to a certain level, combined with sky-high interest on revolving debt – average rates are currently north of 16%, according to Bankrate. The cycle can be difficult to end when you add in missed or late payments and fees.

Clever recently conducted a survey to highlight these issues. Nearly one fifth of people with credit card debt (18%) reported having more than $20,000. Meanwhile 40% of those who carry a monthly balance haven’t been debt-free from credit cards since before 2018, and 15% have been struggling with it for more than 15 years.

Francesca Ortegren is Clever’s lead researcher. “We also found 57% of people having missed credit-card payments, with the majority being in the past one year.” It could lead to a snowball effect and make it harder for people to get out.

It can be very difficult to feel positive about your finances. Clever reports that a third of people with credit card debt believe it will take more than two years to repay it. Twenty percent think it could take three years. Worst of all is the fact that 33% say it’s impossible.

CHARTING A WAY OUT

To be sure, there are glimmers of good news in the debt data. Although credit card balances have increased, early-pandemic falls mean that total debt amounts remain $140 billion lower than at the end of 2019, according to Federal Reserve Bank of New York. The second quarter of 2021 saw a drop in student loan debt by $14 billion.

Personal savings rates, however, are higher than historical norms. And debt delinquencies and defaults are relatively modest, notes Bankrate’s Rossman — which is somewhat surprising, given the length and breadth of our ongoing pandemic crisis.

Rossman is concerned about the possibility that our early-pandemic thrift will be lost and that the desire to spend, after so much time cooped up, will reverse any progress made.

Americans need to be proactive. He recommends that Americans take advantage of the increasing amount of 0% balance-transfer cards and partner with non-profit credit counsellors such Money Management International or GreenPath. Also, pay high-rate card debt with a low-rate personal loan.

Rossman said that keeping lower balances would make a difference in the long-term. “You don’t want to throw that all away and run those balances right back up – because this is very expensive debt.”