Unemployment is stoking credit card debt. U.S. credit card companies and retail industries' worries stem from unemployment. The unemployment rate in January 2020 was 3.5%. A year later it's 6.7%. Credit Card expert Ted Rossman says for CreditCards.com, Bankrate surveyed card holders about making minimum payments. Employment stood out. We asked people, 'what if you were not able to work'. Half said that would bring a major effect."
Rossman says the use of credit cards is down which means businesses are suffering. He says use of credit cards is down because business at restaurants and the like are down. But, he says actual credit card debt for most Americans is growing. A survey conducted for CreditCards.com explains. "51% of people with credit card debt actually have more debt than when the pandemic started."
Unemployment has almost doubled since January, 2020 and Rossman says typically credit-card pay-off rates equal unemployment rates. "Almost half of people who added to their credit card debt, specifically credited the pandemic causing unemployment." Rossman says many of the the card holders who increased their debt were still working - but for fewer hours or a reduction in salary.
He says if unemployment numbers continue to grow, credit card companies' will lose money paying off accounts. "Credit Card bills that are unpaid and completely given up on. Typically, that rate matches the unemployment rate."