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Research and Statistics

Credit card accounts in financial hardship surged during COVID outbreak

TransUnion data from March and April show consumers sought help from issuers en masse as the pandemic ravaged the economy

Summary

In normal times, a minuscule fraction of U.S. credit card accounts is in trouble. But the share of card accounts now officially in “financial hardship” status surged to more than 300 times its normal level in April, according to TransUnion.

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In normal times, a minuscule fraction of U.S. credit card accounts is in trouble. Enter the coronavirus crisis, however, and the share of card accounts now officially in “financial hardship” status has surged to more than 300 times its normal level.

In light of the pandemic and the unique financial havoc it has caused, credit reporting agency TransUnion recently kicked off a new Monthly Industry Snapshot report. It shows that where the number of card accounts in financial hardship numbered 10 out of 100,000 accounts in March, that number ballooned to 3,220 accounts in April, the report’s inaugural reporting period.

Financial hardship status is something you can request for credit cards or other debt if you’ve fallen on hard times and anticipate having trouble keeping up payments. Each card issuer sets its own criteria, however, and is not obligated to grant your request.

For those who secure financial hardship status, it often comes with reduced or eliminated interest charges, reduced payments, waived late fees or extended due dates, or possibly some combination of these.

TransUnion’s research additionally found differences among the various credit risk groups. Though subprime cardholders typically have the highest rate of financial hardship status, at 14 out of 100,000 accounts, the surge from March to April was much stronger among prime cardholders.

See related: 23% of consumers added to their card debt during the pandemic, poll shows

From one of the lower March readings, of just eight accounts out of 100,000, the number of prime borrower card accounts in financial hardship skyrocketed to 3,540 per 100,000 in April.

Fortunately, TransUnion’s data shows serious delinquency rates in the credit card market did not rise from March to April. In fact, they declined slightly from 2.56% at 60 or more days past due in March down to 2.27% in April.

This could be due both to the pandemic still being in its early stages at this point in the data, as well as the assistance many consumers have received from federal programs and lenders.

TransUnion’s Monthly Industry Snapshot utilizes a stratified random sample of 5 million consumers obtained from its Prama DataHub. The report’s first results were released May 20.

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