As retail bankruptcies pile up and anxiety increases about the long-term economic impact of the pandemic, there’s one surprising trend that’s emerging: Consumers are getting rid of their debt.
After the Federal Reserve said the amount of consumer revolving credit dropped by $24 billion in May — marking the third straight month of declines — a Civic Science study dug more into the trend.
In a survey of more than 2,100 adults, 44% of respondents said they paid off all of their credit card debt over the past three months. By contrast, just 7% said they’ve taken on more credit card debt — and most in that group have lost their jobs or been furloughed.
There are several reasons why consumers appear to be paying off more debt now, including the fact that some Americans have received both tax refunds and stimulus checks in recent months. With another stimulus on the table, another check could be in the mail soon.
When asked by Civic Science how they plan to use a potential stimulus windfall, 33% of the respondents said they would use it to pay down debt and bills, compared with 29% in March.
With travel restrictions in place across much of the country — and Americans’ long haul destinations severely limited — consumers are spending less money overall, especially on travel.
As the pandemic stretches on, fashion and footwear has been hit hard too — and in many cases, retailers are struggling to lure fearful consumers back into stores. The big question remains: When will shoppers want to spend again?
“Online shopping is one of many new behaviors and routines developed while under stay-at-home restrictions that are likely to have some staying power, but brick-and-mortar retail can continue to bridge the consumer-confidence gap with things like improved contactless services, sanitizing practices and personal appointments,” added Rugolo. “Consumers have demonstrated their continued willingness to spend on specific apparel items during the pandemic while adapting to new ways of shopping, and while we navigate the road back to some normalcy, apparel retail will need to adapt as well.”