The COVID-19 Shock and Consumer Credit: Evidence from Credit Card Data

Abstract

We use credit card data from the Federal Reserve Board's FR Y-14M reports to study the impact of the COVID-19 shock on the use and availability of consumer credit across borrower types from March through August 2020. We document an initial sharp decrease in credit card transactions and outstanding balances in March and April. While spending starts to recover by May, especially for risky borrowers, balances remain depressed overall. We find a strong negative impact of local pandemic severity on credit use, which becomes smaller over time, consistent with pandemic fatigue. Restrictive public health interventions also negatively affect credit use, but the pandemic itself is the main driver. We further document a large reduction in credit card originations, especially to risky borrowers. Consistent with a tightening of credit supply and a flight-to-safety response of banks, we find an increase in interest rates of newly issued credit cards to less creditworthy borrowers.

How Resilient Is Mortgage Credit Supply? Evidence from the COVID-19 Pandemic

“…Agarwal et al (2021) show that savings from refinancing during the pandemic are more skewed toward higher-income borrow-ers than in earlier refinancing waves. Work on other consumer credit markets includes Iverson et al (2020) on bankruptcy and Horvath et al (2020) on credit card borrowing.…”

How Resilient Is Mortgage Credit Supply? Evidence from the COVID-19 Pandemic

“…Agarwal et al (2021) show that savings from refinancing during the pandemic are more skewed toward higher-income borrowers than in earlier refinancing waves. Work on other consumer credit markets includes Iverson et al (2020) on bankruptcy and Horvath et al (2020) on credit card borrowing.…”

Non-Intrusive Assessment of COVID-19 Lockdown Follow-Up and Impact Using Credit Card Information: Case Study in Chile

“…For instance, CCR data from the second biggest bank in Spain shows a sharp v-shape in the aggregated consumption due to the strict lockdown measures imposed by the Spanish government [ 20 ], while the authors of [ 1 ] used the aggregate information in a predictive epidemiological model of pandemic evolution in Turkey. A detailed study over the period March–August 2020 on the USA credit card market [ 21 ] found a sharp decrease in transactions and balances in mid-March with a slow incomplete recovery from May onwards. Some economic sectors did experience sharp decreases in activity while others actually increased the volume of transactions [ 22 ].…”

“…Some economic sectors did experience sharp decreases in activity while others actually increased the volume of transactions [ 22 ]. The study in [ 21 ] compares the effect of NPI measures with the psychological pressure of the pandemic roughly measured by the number of cases in the surrounding areas, also known as pandemic severity, finding that pandemic severity has a stronger effect on the diminishing credit card transactions. Pandemic fatigue implies that this effect is weakening over time since the pandemic outburst.…”