WASHINGTON—A report from the Consumer Financial Protection Bureau indicates credit card applications dropped drastically after Covid-19 came to the U.S.
In the second week of March 2020, there was already a 6.8% drop in hard inquiries for revolving credit cards, LowCards.com reported in its analysis.
That jumped to a 39.7% decline by the end of the month.
“What caused the drop in applications? It is most likely a combination of factors. Consumers became leery about the stability of their personal finances, thus reducing the desire to get a new credit card. Card issuers have also pulled back on their marketing efforts, focusing on their existing customers, rather than acquiring new ones,” LowCards.com stated.
Big Spending Decline
Meanwhile, at the nation’s biggest bank, credit card spending among some of JP Morgan Chase’s U.S. customers fell 40% during March and early April compared to last year, as Americans stayed home to protect against the coronavirus, Reuters reported.
Spending on non-essential goods and services, like retail, restaurants, and entertainment, fell sharply across income brackets accounting for nearly all of the drop in spending during that period, the JP Morgan Chase Institute said.
This is primarily due to the stay-at-home orders put in place by many U.S. states, and less due to job loss, at least for now, said Diana Farrell, president and chief executive of JPMorgan Chase Institute.
“While surprising, we expect this may change over time as layoffs, furloughs and unemployment insurance further impact families’ bank accounts,” Farrell said.
The overall fall in spending was eight times larger than the average drop in household credit card spending in the first month of unemployment during regular times, Reuters noted.