The Corona-virus effect.

COVID-19 has been reshaping Americans’ financial habits. During the second quarter, credit card debt and personal savings data showed, overall, we were spending less and saving more than ever before.

In 2019, when a pandemic was a planning and preparedness exercise for epidemiologists, healthcare professionals, and health officials, the debt Americans accrued on credit cards increased between 2.5 and 4.6 percent each quarter.

Since COVID-19 arrived on our shores and began to spread, credit card debt has fallen dramatically. From January through March, it was down 7.6 percent (the seasonally adjusted annual rate). In early July, the Federal Reserve reported the numbers through May:

April 2020:  - 64.8 percent (seasonally adj. annual rate)

May 2020:  - 28.6 percent (seasonally adj. annual rate)

Lower spending may have contributed to higher savings. The personal saving rate (PSR) in the United States is the percentage of income left after people spend money and pay taxes each month. It increased dramatically in 2020:

            January 2020:  7.9 percent (seasonally adj. annual rate)

            February 2020:  8.4 percent (seasonally adj. annual rate)

            March 2020:  12.6 percent (seasonally adj. annual rate)

            April 2020:  32.2 percent (seasonally adj. annual rate)

            May 2020:  23.2 percent (seasonally adj. annual rate)

Some believe higher rates of saving are the result of lockdowns and will reverse quickly as states reopen. An analyst cited by Jessica Dickler of CNBC explained, “In a month with large government stimulus payments to the majority of U.S. households and widespread economic shutdowns that largely curtailed discretionary spending, the boost to income and the plunge in spending produced an outsized savings rate.”

The shift in percentages from April to May appear to support the hypothesis. We won’t really know whether Americans will continue to charge less and save more until the pandemic ends.