Many Americans are still facing tough times when it comes to their credit. New data released by the Federal Reserve shows that consumer borrowing in the United States fell by nearly 20 percent in April, the fastest decline since 1943.
Pymnts.com reports that the reduction in debt was mirrored by an increase in savings. And while that might be viewed as a good thing, some analysts say that people are using credit less because their credit limits have in some cases been drastically cut. Some have even seen their cards cancelled.
Access to credit is also tightening, as banks traditionally make it more difficult to get credit during financial downturns.
Beverly Anderson, president of global consumer services at Equifax, said that the credit limit reductions have hit consumers at all income levels. In past downturns, such consumers have been at least somewhat protected from those kinds of adjustments.
Home equity is where homeowners often turn when they need additional money, but some banks have made it much more difficult to get a Home Equity Line of Credit (HELOC), and a few, including Wells Fargo, have stopped offering HELOCs all together.
In a recent discussion, Anthony Eisen, co-founder and CEO of Afterpay, said that younger consumers are looking for alternatives to traditional banks and credit cards for credit because they think it is a better option. Whether that trend continues is yet to be seen, but analysts at PYMNTS.com believe that it is possible that there could be a major sea change on the horizon as consumers use credit cards less and access to traditional credit becomes more limited.