The report also confirmed that credit card users living in majority Black and Hispanic zip codes had higher interest rates and lower credit limits and carried balances longer than those living in predominately white zip codes.
WASHINGTON, D.C.—A new report released today by the Government Accountability Office (GAO) found that financial aid provided by the federal government during the COVID-19 pandemic helped millions of working-class Americans reduce their credit card debt. It was the first time in nearly a decade that the share of active credit card accounts with a balance declined. The report was commissioned by Sen. Bernie Sanders (I-Vt.), Chairman of the Senate Health, Education, Labor, and Pensions (HELP) Committee, and Sen. Sheldon Whitehouse (D-R.I.), Chairman of the Senate Budget Committee.
Pandemic assistance from the government—such as economic impact payments; the expanded, monthly child tax credit; expanded unemployment insurance; suspended student loan payments; and a moratorium on evictions—helped shorten the time credit cardholders carried balances and reduced the number of seriously delinquent accounts.
“This report demonstrates once again how critically important the American Rescue Plan was to the financial well-being of working families with children, the elderly, the sick, and the most vulnerable during the height of the pandemic,” said Sen. Sanders. “Unfortunately, now that this financial assistance has expired, large financial institutions are filling the void by trapping working families into massive credit card debt and predatory loans that come with usurious interest rates and exorbitant fees. That is absolutely unacceptable. Not only do we need to extend the $300-a-month direct payment for working families with children that cut the child poverty rate by more than 40 percent during the pandemic, we also need to cap credit card interest rates and sky-high fees. In other words, we need an economy that works for all of us, not just Wall Street CEOs and the top 1 percent.”
“This GAO report is a reminder that investing in workers and families is not just morally right, it’s also good for our economy,” said Sen. Whitehouse. “We know that legislation passed during the depths of the pandemic recession enabled our economy to bounce back faster and stronger than predicted because these investments kept families afloat and improved their financial well-being. We can invest in creating an economy that works for the many and not just the wealthy few, and we can ensure that people keep more of their money—so less lines the pockets of corporate debt servicers—by placing reasonable caps on consumer interest rates, as so many states have tried to do.”
The GAO found that revolving balances declined from about $1,737 in April 2020 to $1,529 in December 2021—about 12 percent. Still, the report confirmed credit card debt looms large in the lives of most Americans: 532 million consumer credits cards represented a total outstanding debt of $856 billion as of 2021. From 2018-2020, Americans paid $120 billion in credit card interest and fees on average each year, which is about $1,000 per household in America. According to a separate report from the Federal Reserve, the average credit card interest rate in the U.S. was 22.77 percent, which is more than four times the average rate for an auto loan.
Other findings in the report confirmed, yet again, that credit card users living in majority Black and Hispanic zip codes had higher interest rates and lower credit limits and carried balances longer than those living in predominately white zip codes. On average, cardholders of color pay about 1.3 percent more in interest. Credit card limits for Black and Hispanic cardholders are about $3,412 and $4,285 lower than that of white cardholders, respectively. Even credit card ownership varies by race and ethnicity, with 93 percent of Asian adults, 88 percent of white adults, 77 percent of Hispanic adults, and 72 percent of Black adults owning a credit card.
This latest report follows other GAO reports commissioned by Sen. Sanders that help shed light on economic disparities, including analysis on life expectancy variations by income, the financial status of Millennials, and the retirement savings gap, the latter of which was co-commissioned with Sen. Whitehouse.
In June, Sens. Whitehouse, Sanders, and colleagues re-introduced their Empowering States’ Rights to Protect Consumers Act, legislation to restore states’ ability to limit consumer loan interest rates for their residents and help address the record credit card debt held by Americans.
Read the full report here.