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

54 Pages Posted: 29 May 2020 Last revised: 4 Feb 2021

See all articles by Akos Horvath

Akos Horvath

Board of Governors of the Federal Reserve System

Benjamin S. Kay

Board of Governors of the Federal Reserve System

Carlo Wix

Board of Governors of the Federal Reserve System

Multiple version iconThere are 3 versions of this paper

Date Written: January 8, 2021

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.

Keywords: COVID-19, consumer credit, credit cards, household spending, bank lending, credit supply

JEL Classification: E21, G21, G51, I18

Suggested Citation

Horvath, Akos and Kay, Benjamin and Wix, Carlo, The COVID-19 Shock and Consumer Credit: Evidence from Credit Card Data (January 8, 2021). Available at SSRN: https://ssrn.com/abstract=3613408 or http://dx.doi.org/10.2139/ssrn.3613408

Akos Horvath

Board of Governors of the Federal Reserve System ( email )

20th Street and Constitution Avenue NW
Washington, DC 20551
United States

HOME PAGE: http://https://www.federalreserve.gov/econres/akos-horvath.htm

Benjamin Kay

Board of Governors of the Federal Reserve System ( email )

20th Street and Constitution Avenue NW
Washington, DC 20551
United States

HOME PAGE: http://https://www.federalreserve.gov/econres/benjamin-s-kay.htm

Carlo Wix (Contact Author)

Board of Governors of the Federal Reserve System ( email )

20th Street and Constitution Avenue NW
Washington, DC 20551
United States

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