Credit card balances edged down in December, even as consumers engaged in holiday shopping, as uncertainty about a second round of stimulus checks extended to the latter part of the month.
Consumer revolving debt â which is mostly based on credit card balances â was down $3 billion on a seasonally adjusted basis in December to $975.9 billion, according to the FedâsÂ G. 19 consumer credit reportÂ released Feb. 5.
In December, credit card balances were off 3.6% on an annualized basis, following Novemberâs revised 0.8% dip and Octoberâs 6.7% drop, which came on the heels of Septemberâs 3.2% annualized gain.
The Fed also reported that student loan debt outstanding for the fourth quarter rose to $1.707 trillion, from the third quarterâs $1.704 trillion. And auto loan debt outstanding gained to $1.228 trillion, from the third quarterâs $1.219 trillion.
Total consumer debt outstanding â which includes student loans and auto loans, as well as revolving debt â continued to grow and rose $9.7 billion to $4.184 trillion in December, a 2.8% annualized gain.
For the entire year, credit card balances were down 11.2%.
Card balances had been growing before the coronavirus impacted consumer spending and bank lending in 2020. They dipped below the $1 trillion mark last May, for the first time since September 2017.
See related: 51% of consumers accrued more debt duringÂ the pandemic
ABA sees brighter days ahead for credit availability
The American Bankers Association reports, based on input provided by chief economists of large North American banks to its credit conditions index for the first quarter of 2021, that credit conditions (both credit quality and availability) have rebounded from their lows of last summer.
However, all three components of the index (the headline credit index, the consumer credit index and the business credit index) remain below 50, which is not a robust index reading. It indicates that while bank economists expect credit conditions to remain âsoftâ in the coming six months, they are less pessimistic than they were in September 2020 when the ABAÂ conducted its last credit conditions survey.
The consumer credit index component of the survey gained to 45.3, its highest level since mid-2019. Economists are optimistic about both the availability and quality of consumer credit compared to September. They expect credit to be more available to consumers in the coming six months, although a small majority expects credit quality to decline.
âAlthough credit quality is still expected to worsen over the first half of the year for both consumers and businesses, the overall outlook for credit markets has improved significantly since the summer and fall,â said Rob Strand, ABA senior economist. âAs widespread inoculations against the virus and new fiscal stimulus measures help heal the economy, banks will continue to work closely with policymakers, consumers and businesses to ensure that affordable credit remains available and recovery strengthens.”
Fed reports easing of credit card lending standards in fourth quarter
According to the Fedâs senior loan officer opinion survey on bank lending practices for January 2021 (which is based on input related to the fourth quarter of 2020), a âmoderate net share of banksâ reported that they had eased up on credit card loans.
As a result, a âmodest net share of banksâ also hiked up their credit limits on credit card accounts. And a âmoderate net share of banksâ reported that there was higher demand for credit card loans during the fourth quarter.
As for the outlook, a âsignificant net share of banksâ is expected to ease up on their standards for credit card loans. They are doing so in anticipation of an improvement in their loan portfoliosâ credit quality, as well as a hike in their tolerance for risk.
Also, the New York Fedâs survey of consumer expectations for December 2020 finds that consumers are less concerned about the possibility of missing a minimum debt payment in the coming three months. The average perceived probability of this occurrence dipped to 10.5% for December, from Novemberâs 10.9%.
See related: What happens when you miss a credit card payment?
Jobs edge up in January
The New York Fed survey also finds that on average fewer consumers expect the unemployment rate to be higher a year from now, with this probability declining to 38.9%, from Novemberâs 40.1%.
While the average perceived probability of losing a job in the coming 12 months rose up a bit to 15% (mainly on account of those without a college degree), respondents were also more likely to leave their job voluntarily. However, they were less optimistic about landing a new job if they lost their current ones.
The U.S employment situation was about stable in January, with the economy adding 49,000 jobs, the government reported Feb. 5. âThe labor market continued to reflect the impact of the coronavirus pandemic and efforts to contain it,â according to the Department of Laborâs employment report media release. The unemployment rate dipped 0.4 percentage points to 6.3% and average hourly earnings were up $0.06 to $29.96. Also, the job numbers for both November and December were revised down, with November down 77,000 jobs (to 264,000) and December losing an additional 87,000 jobs (to minus 227,000).
In his daily email commentary, Ian Shepherdson, chief economist at Pantheon Macroeconomics, noted, âCoupled with the -159K net revision, this is a significantly softer report than expected, at least in terms of payrolls. Bulls will cite the large and unexpected drop in the unemployment rate, but two-third(s) of the decline was due to a 405K drop in the size of the labor force â a sign of discouragement â while household employment rose 201K.â
He added that âthe labor market was frozen at the start of the year, and is completely dependent on the pace of reopening, which in turn is contingent on the speed and sustainability of the fall in hospitalizations.â
Reader Alesia writes, âI disputed a collection account from 2016 on my credit report with all three bureaus. Two of them deleted the account. However, Experian did not and the creditor has updated the date of collection to November 2020. Does this mean it will now stay on my report until 2027? And why did the two delete it and not the other? I still dispute the account. What can be done in these situations?â
When you donât pay your credit card bill or loan payment on time, the creditor eventually declares it delinquent. And typically six months after the time you first stopped paying your dues, it will either write it off or send it to collections. If itâs the latter course of action, the delinquent account becomes a collection account.
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Each credit bureau has its own processes
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Alesia, the three credit bureaus â Equifax, Experian and TransUnion – are all independent of each other and have their own processes. Thatâs why you rightly disputed the collection account with all three of them individually.
Equifax, one of the three credit bureaus, advises in online commentary, âItâs important to remember that disputing information with one credit bureau may not impact information on credit reports from the other two bureaus. Also, dispute procedures may not be the same at all bureaus, so be sure to follow the procedure with the bureau where you’re filing a dispute.â
When you file a dispute with a credit bureau, the bureau will contact the creditor and ask it to look into the information and check its records. The creditor then has a 30-day time frame to respond to the credit bureau with accurate information. If the creditor does not respond by this deadline, the credit bureau can then act on any information the consumer has provided to update the account or remove it.
It may be that the creditor did not get back to Experian in time with the relevant information, and the credit bureau did not make any changes on your account. Or it may not have responded to all three of them in time, and each then acted on its own information (each has its own input on your credit history) and processes in dealing with the account. It could also be that the lender did not provide the same input to all three credit bureaus, for whatever reason.
Also note that the coronavirus pandemic has upset these dispute investigation timelines, and the CFPB has even said it will be lenient in allowing the stretching of this time frame somewhat for lenders and credit bureaus that are looking into disputes.
See related: A collection agency is pursuing me for an old debt I don’t recognize. What to do?
Date of first delinquency is whatâs important
Alesia, you report that the creditor updated the date of collection on the account with Experian to November 2020, whereas this collection account goes back to 2016. One important date related to delinquent accounts and collection accounts is the date of first delinquency.
This is the date on which the debt first went delinquent. The debt will be reported on your credit report for seven years after this date. In the case of a collection account, it will be on your credit report for seven years after it went into collection, which is typically six months after the date of first delinquency.
This means it will show on your credit report for up to seven-and-a-half years following the date of first delinquency. The creditorâs updating of the date of collection to November 2020 would mean there is a change to the date of last activity on the account. It does not change the actual date of first delinquency. So the debt will be reported through 2023 and not 2027.
See related: What should I do if my debt’s date of first delinquency is incorrectly reported?
You could initiate another dispute
The Fair Credit Reporting Act allows you to initiate a dispute with the credit reporting agency or the creditor that furnished the information to an agency if you donât agree with whatâs in your credit report. Alesia, you have gone through this process with all the credit bureaus, but you donât agree with the result provided by one credit bureau.
You should contact the collection agency that provided the input to Experian to find out how this happened and see if you can sort out the issue. If there is a mistake it agrees to rectify with the credit bureau, donât forget to get written input about the resolution for your records.
If that doesnât work, you have the option of filing another dispute with Experian, and also with the furnisher of the information. Make sure to provide any additional and relevant information that could boost your case, such as updated credit reports from the other two credit bureaus.
If you donât agree with the dispute resolution, you could also have a statement added to your credit report providing your account of the dispute.
Another course of action is to file a complaint with the CFPB, using its consumer complaint database. In case you donât get a desirable outcome after all this, youÂ could even talk to a lawyer specializing in FCRA matters to get more detailed assistance on your particular situation.
Alesia, I hope the matter is ultimately resolved to your satisfaction!
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In response to the coronavirus pandemic, major credit card issuers are offering relief to their customers.
Even though many places around the country are open, the pandemic continues to impact the U.S. economy. Workers are still at risk of being laid off or facing reduced hours or pay.
“This is a rapidly evolving situation and we want our customers to know we are here to provide assistance should they need it,â Anand Selva, chief executive officer of Citiâs consumer bank, said in a statement in Spring 2020.
At the same time, scammers are now trying to take advantage of coronavirus concerns by sending out fake emails about the virus that are designed to steal consumersâ personal and financial information or to infect their computers with malware.
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Many credit card issuers are allowing customers to opt into financial relief programs online. These programs are a convenient way to access short-term relief. But it could come with a long-term cost as many cardholders will continue to see interest accrue. With the average credit card interest rate sitting at 16.05%, cardholders might find more cost-effective relief through other options.
Here’s what issuers are currently offering:
Cardholders who are having difficulties can get assistance through American Express’s financial hardship program. Eligible cardholders have the option to enroll in a short-term payment plan, which provides relief for 12 months, or a long-term plan, which can provide relief for either 36 or 60 months.
Under both options, you will receive lower interest rates, plus waived late payment fees and annual fees. But you might not have access to certain card benefits and features.
If you enroll in the short-term plan, you might be able to continue putting new purchases on the card but with a reduced spending limit. If you are participating in the long-term plan, you will not be able to use the card.
Amex will report participating cardholders to the credit bureaus as current, assuming they comply with the program’s rules. But the program’s terms do offer some important caveats: Amex will inform the credit bureaus that you are enrolled in a payment assistance program (if you’re in the long-term plan). And under both plans, Amex will report that you have a lower credit limit.
While these factors do not have as much of an impact on your credit score as a delinquent account does, it could still signal to other lenders that you might be having some financial hardship.
Bank of America
Bank of America cardholders who have trouble paying credit card bills can request a credit card payment deferral by calling the number on the back of their card.
To qualify for payment assistance, cardholders must be carrying a balance, according to the website.
Bank of America sent an email to Preferred Rewards members in May 2020 stating that the company had temporarily suspended the annual program review process. Members whose assets dropped below the regular threshold to keep their status would continue to qualify for program benefits. It is unclear if Bank of America is still suspending this program.
Barclays urges credit card account holders to request payment relief online. As of May 4, 2020, the bank is granting payment relief for two statements, but interest will continue to accrue.
âWe understand that this is a time of uncertainty for many people, and we know that there may be instances where customers find themselves facing financial difficulties. Capital One is here to help and we encourage customers who may be impacted to reach out to discuss how we might be of assistance,â the bank said in a statement.
In a March 26, 2020 update, Chairman and CEO Rich Fairbank confirmed that they are offering waived fees and deferred payments on credit cards for some cardholders.
Because each customerâs situation is different, the bank encourages customers to contact it directly. To contact Capital One customer service about an existing account, call (800) 227-4825.
See related: How to clean your credit card
Previously, Chase Bank stated that customers will be able to “delay up to three payments on your personal or business credit card” if needed, with interest continuing to accrue. The website currently does not specify how many payments cardholders can defer.
It also stated that active duty military members who are responding to a disaster might have access to additional benefits. Servicemembers can call the bank for more information.
In a letter to shareholders, the company’s CEO, Jamie Dimon, also promised to not report late payments to the credit bureaus for “up-to-date clients.”
See related: Chase offering limited-time bonus on food delivery for some cardholders
Citi customers who have been impacted by the coronavirus pandemic might be eligible for assistance. Previously, the bank was waiving payments and late fees for two consecutive billing cycles. However, Citi has ended its pandemic assistance program.
“Due to a significant and steady decline in enrollments, our formal COVID-19 assistance program has concluded and we will focus on providing assistance options to those customers financially affected by COVID-19 on a case-by-case basis. We continue to closely monitor the situation and will evaluate additional actions to support our customers and communities as needs arise,” a spokesperson for Citi said in an email.
During the bank’s pandemic assistance program, interest continued to accrue, but accounts that were current at the time of enrollment were not be reported as delinquent.
Discover will be extending relief to qualified customers who are experiencing financial difficulty caused by the spread of COVID-19.
“We encourage them to contact us by calling and are directing them to www.discover.com/coronavirus for phone numbers for each product line and other FAQs,” Discover said in a statement earlier this year. “We also can provide relief through our mobile text app, which connects a customer directly with an agent.”
Discover it Miles cardmembers can also put their miles towards their bill â including their minimum payment.
See related: What to do if you can’t pay your business credit card bill
Apple Card customers can enroll in an assistance program. Previously, cardholders could waive payments without accruing any interest. The website currently doesn’t specify if this is still the case.
Cardholders can defer payments for three billing cycles. Though interest will continue to accrue, enrolled cardholders will not receive late fees, and their accounts will be reported as current, as long as accounts were not delinquent at the time of enrollment.
Synchrony is extending relief to customers experiencing financial hardship. The company’s website previously stated that this could include payment relief for up to three statement cycles, while interest would continue to accrue. The website currently offers no specifics about what the issuer is prepared to offer.
Truist (formerly SunTrust and BB&T)
Previously, Truist offered payment relief assistance to customers with personal and business credit cards, among other products. As of April 14, it was willing to delay payments for up to 90 days. The website currently offers no specifics about what the issuer is prepared to offer.
Previously, impacted cardholders could defer monthly payments for two consecutive billing cycles. The company’s website currently does not specify what assistance cardholders can expect to receive.
See related: Coronavirus stimulus legislation doesnât suspend negative credit reporting
ultimate guide to coronavirus limited-time promotions for more offers designed to help cardholders maximize rewards amid the coronavirus pandemic.
Business credit cards
If you are a small-business owner and cash is not flowing and bills are piling up, the most important thing to do is contact your card issuer.
Some banks are also providing assistance in case you can’t pay your business credit card bill.
Another coronavirus complication: Scams
As consumers wrestle with the impact of the coronavirus, scammers are trying to take advantage of the situation.
In a June 2020 public service announcement, the FBI warned that the increasing use of banking apps could open doors to exploitation.
“With city, state and local governments urging or mandating social distancing, Americans have become more willing to use mobile banking as an alternative to physically visiting branch locations. The FBI expects cyber actors to attempt to exploit new mobile banking customers using a variety of techniques, including app-based banking trojans and fake banking apps,” the PSA warns.
Scammers might also be capitalizing on health and economic uncertainties during this time. In one such scam, cybercriminals are sending emails claiming to contain updates about the coronavirus. But if a consumer clicks on the links, they are redirected to a website that steals their personal information, according to the Identity Theft Resource Center (ITRC).
Identity theft in 2020: What you need to know about common techniques
The outbreak of a disease can upset daily life in many ways, and the ripple effects go beyond our physical health. Thankfully, many card issuers are offering relief. If you’re feeling financially vulnerable, contact your credit card issuer and find out what assistance is available. And while data security may seem like a secondary consideration, it’s still important to be vigilant when conducting business or seeking information about the coronavirus online.