COVID-19 kept credit card applications depressed for a year

When the pandemic hit, the number of Americans credit card applications drastically reduced, such as with mortgages and auto loans. But the recovery for card applications moved slower. It remained below the baseline, despite other credit types applications recovering since March 2020.

The Consumer Financial Protection Bureau (CFPB) did a 15-month study comparing credit card application numbers with a baseline established in March 2020, plus mapped volumes against the month-to-month trend seen in the pre-pandemic years of 2013-2019.

The study results showed that credit card depression at the beginning of the pandemic was so strong, and the low volumes so persistent, that it took a whole year for the number of card applications to return to normal levels, reaching the pre-pandemic normalcy in mid-March 2021. But, besides the applications recovered in the spring, they were back below baseline levels in May and June.

The worst days for card applications were in June 2020, when they decreased 46% from pre-pandemic trends, while previous years increased 6% in the same month.

Normally, November and December have a higher number of card applications, but it wasn’t enough to bring the pandemic back to normal levels. While the holiday spike averaged 33% in pre-COVID years, the credit card application volumes in November 2020 were depressed by 6%.

Plus, the post-holiday applications crashed by 38% from March 2020 levels. In contrast, the more modest drop seen before the pandemic was 11%.

Besides auto loans also took time to recover, they were restored faster than card applications and reached pre-COVID leves after 10 months. On the other hand, mortgage applications recovered after only two months and have stayed above pre-COVID levels ever since. And the motive is simple: the low interest rates set by the Federal Reserve’s pandemic response.

The CFPB researchers used a longitudinal1-in-48 sample of de-identified credit records from one of the three nationwide consumer reporting agencies, comprising some five million credit records.