How COVID affected the use of credit cards in 2020

Travel restrictions and lockdowns in the US over an unusual 2020 led to an equally unusual year for spending and credit cards. Finder’s early observations of spending habits as 2020 dragged on revealed consumers who were hesitant rely on credit cards due to concerns around uncertain income and potential emergency needs.

Heading into 2022, we have more data that backs up these observations and sheds light on how the global pandemic ultimately affected how American consumers used their credit cards during 2020.

Average credit card debt dropped

As we suspected, credit card spending on average dropped in 2020, resulting in an average credit utilization ratio of 25.3%. Alongside this reduction in card use is a reduction in average credit card debt, from $6,194 in 2019 to $5,313 in 2020.

Delinquent payments dropped

Like credit utilization and credit card debt, 2020 saw a decrease in the number of accounts with payments past due — the largest drop in the 90- to 180-day delinquency bracket. This could be a result of consumers taking greater care with their credit card spending, but other factors are at play as well.

Notably, card providers were more lenient in reporting specific payments as delinquent thanks to the CARES Act, which prohibited adverse credit reporting for specific circumstances. Americans also received a stimulus package of $1,200 to assist with income, which may have helped keep payments up to date.

Changing habits led to improved scores in 2020

A combination of fewer past-due accounts and lower overall credit utilization resulted in impressive credit score gains by the third quarter of 2020.

The average US FICO score jumped by seven points from 2019 to 2020. Typically, average FICO score increases from year to year are just one point, according to past data from the credit reporting bureau Experian.

At 710, this average is a record year for the US FICO score. In all, roughly 69% of Americans had at least a good credit score of 670 or higher by the third quarter of 2020.

Generations increased their credit scores

Baby boomers and the silent generation traditionally hold the highest average credit scores among all generations, and they had the smallest credit score gains in 2020 as a result. Other generations experienced large growth, with millennials gaining an 11-point increase over the generation’s 2019 average.

More 2020 credit card consumer debt statistics

Here’s a look at more statistics that reveal the pandemic’s impact on spending habits.

Consumer card accounts that were 30 or more days past due dropped by 29% in 2020

There was a significant reduction in the number of observed accounts that were 30 days or more past due, a testament to higher vigilance around spending and credit management. This is a notable difference from 2019, when the percentage of accounts 30 days or more past due increased by 3%.

Overall credit card debt dropped by 14%

In line with this careful spending, overall credit card debt dropped by 14% in 2020.

75% of US adults had a card balance greater than $0

That said, consumers didn’t abandon their credit card spending habits altogether during the pandemic. Many continued to use credit cards reguarly throughout 2020.

More than 90% of US adults had a card account on their credit report

In fact, credit cards remained a popular form of credit among US consumers. Only auto loans came close at 62% of US consumers having one, followed by mortgages at 44%.

The percentage of subprime consumers dropped from 33.8% to 30.9%

While a relatively small percentage, it’s a significant improvement from 2018 to 2019, when the number of consumers with a subprime credit score dropped by less than 1%.

Other 2020 credit card industry trends

Consumer debt and spending weren’t the only notable changes in 2020. The pandemic affected everything from approval rates to credit card search inquiries.

Credit card interest rates and payments

We saw the average interest rate across general purpose credit cards fall in 2020, as well as a decrease in the amount of fees charged to accounts. The fee reduction — which fell to $20.8 billion from $23.6 billion in 2019 — was influenced greatly by fee waivers introduced during the early stages of the pandemic.

• Average credit card interest rate for general purpose cards fell to 19.2% by the end of 2020
• Average fees assessed fell to 5.2% of balances in 2020, down from 6.2% in 2019
• 20% of active card accounts were enrolled in automatic payments in 2020, up from 16% in 2018

Credit card searches and applications

While approval rates have been on the decline in recent years, 2020 moved this trend forward. Credit card providers became more reserved overall in 2020, with providers approving fewer card applications and even removing balance transfer offers from products. Consumers also applied for fewer cards in 2020 overall, though search volume data on credit cards reflect a surprising range of card types with a particular focus on store cards. Here’s what the data shows us:

• 140 million credit card applications were filed in 2020, down from 172 million in 2019.
• The application approval rate declined to 36% in 2020, down from 41% in 2019.
• Some 84.8 million accounts were opened in 2020, a drop of 21.5% from the year before. The total opened include 53.7 million general use cards and 31.1 million store cards.

Top 5 most searched credit card inquiries during 2020 (Statista)

Interested to learn more about American credit card habits? Check out Finder’s findings on credit card statistics in the United States in 2022.

Overall search volume for credit cards dropped by 8% from March to August 2020