Give a man a fish and he’ll eat for a day. Give him a stimulus check and he’ll pay off some credit card debt.
That’s the finding of Congress’ Government Accountability Office, which released a report Monday finding that the stimulus checks the government cut at the start of the pandemic in 2020 helped millions of Americans pay off their credit cards.
About half of U.S. credit cards carried balances at the start of the pandemic. By the end of 2021, after a year and a half of intensive government support, including three rounds of stimulus payments, that rate had been cut to just 45%.
And the median balance Americans carried dropped about $200 over that time, GAO said, dipping to $1,529 by the end of 2021. Adjusted for inflation, that’s about 20% lower than the average balance in 2013.
Overall, there were fewer delinquencies and credit scores improved across all categories during the early months of the pandemic. And those with subprime scores saw the biggest improvements, according to GAO’s work.
“Pandemic-related assistance provided by the federal government and credit card issuers likely contributed to cardholders paying down their credit card balances, according to our analysis,” GAO said.
Senators who requested the report said it gives them new ammunition to push for continued government support.
“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% during the pandemic, we also need to cap credit card interest rates and sky-high fees,” said Sen. Bernard Sanders, chairman of the Senate Health, Education, Labor and Pensions Committee. “In other words, we need an economy that works for all of us, not just Wall Street CEOs and the top 1%.”
GAO’s findings were part of a broader look at credit card use, with some striking findings about race.
Investigators said card-holders who lived in zip codes with majority Black or Hispanic populations carried lower balances but also had higher interest rates and lower credit limits and ended up carrying balances longer than card-holders in White-majority zip codes.
That means generally higher borrowing costs for those in the worse-off zip codes, GAO said.
Federal Reserve data showed 84% of U.S. adults had at least one credit card account in 2021. Most held one or two cards, but 20% of consumers had five or more cards.
About 60% of those who lived in lower-income zip codes — where the median income was below $50,000 — carried a balance. For those in high-income zip codes, with incomes above $150,000, 33% carried a balance.
In any given month from 203 to 2019, up to 11% of revolving accounts hit their credit limit.
The pandemic cut those rates as Americans tightened their belts but also got unprecedented assistance from Uncle Sam.
GAO pointed to expanded unemployment benefits, the Advance Child Tax Credit in 2021 and three rounds of stimulus payments — up to $1,200 per taxpayer in April 2020, another $600 at the start of 2021 and $1,400 more that spring.
Suspension of loan payments on student loans and some mortgages, and a moratorium on evictions may also have helped borrowers prioritize payments to pay off credit card debt, GAO said.