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Revolving credit debt drops to $996 billion—the lowest since the great recession

Americans' spending on revolving credit accounts has declined during coronavirus and is currently at $996 billion, whereas non-revolving credit debt increased.

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Americans' spending habits continue to be affected by the coronavirus pandemic, with new data from the Fed showing a decline in revolving credit debt for the third month in a row.

Revolving credit debt dropped to $996 billion in May 2020, which is the lowest since the great recession's decline to $833 billion in May 2011. Revolving credit primarily includes credit cards, but also personal lines of credit and home equity lines of credit (HELOCs).

Meanwhile, non-revolving credit debt, commonly referred to as installment debt, rose to $3.117 trillion in May 2020, after a dip in April 2020 ($3.111 trillion). Non-revolving debt includes mortgages and auto, student and personal loans.

Below, CNBC Select reviews key findings from the Fed's most recent data and explains how revolving and non-revolving credit work.

Key findings

  • Revolving credit debt dropped to $996 billion in May 2020.
  • Previous low for revolving debt was $833 billion in May 2011 — the height of the great recession.
  • Non-revolving installment debt rebounded from a decrease in April to hit its second-highest ever at $3.117 trillion in May 2020.

Revolving credit vs. non-revolving credit

Revolving credit accounts are open-end agreements that let you borrow money up to a maximum amount (known as your credit limit), pay it back over time and continue to make more charges and payments while your account remains open and in good standing. You typically have the option to pay off debt in full at the end of each billing cycle or "revolve" it and carry a balance month-to-month with interest charges.

For instance, let's say you have a credit card with a $5,000 credit limit. You charge $1,000 every month and repay it by your due date. Until you pay off your bill, your available credit will be $4,000. But after your payment is processed, you'll have access to your full $5,000 credit limit again.

On the other hand, non-revolving or installment credit accounts provide fixed terms where the dollar amount of the loan, interest rate and length of the term are all predetermined. For example, you can take out a mortgage for $250,000 with a 2.75% rate and 30-year repayment term. You're required to make preset monthly payments toward your loan and once it's repaid in full, your loan is over.

Revolving credit debt in 2020

Revolving credit debt hit the lowest amount this year at $996 billion, which is also the lowest amount in nine years (since dropping to $833 billion in May 2011).

Here's the breakdown of revolving credit debt in 2020:

  • January: $1.093 trillion
  • February: $1.100 trillion
  • March: $1.078 trillion
  • April: $1.020 trillion
  • May: $996 billion

Non-revolving credit debt in 2020

Non-revolving debt spiked in May ($3.117 trillion) after roughly a $12 trillion drop in April. The $3.117 trillion balance marks the second highest since the $3.123 trillion peak in March.

Here's the breakdown of non-revolving credit debt in 2020:

  • January: $3.098 trillion
  • February: $3.113 trillion
  • March: $3.123 trillion
  • April: $3.111 trillion
  • May: $3.117 trillion

Bottom line

While revolving debts like credit card balances have declined the past few months, the debt is still near $1 trillion. And as we saw over the last decade when revolving debt went from a low of $833 billion during the Great Recession to a peak of $1.10 trillion in February 2020 — it will likely increase again as the economy rebuilds.

If you're carrying a balance month-to-month, consider transferring it to a balance transfer card like the U.S. Bank Visa® Platinum Card with a 0% APR for the first 20 billing cycles on balance transfers and purchases. After the intro period, there's a 13.99% to 23.99% variable APR.

And if you don't have any debt but have extra money from reduced spending, consider putting it into a high-yield savings account, such as Marcus by Goldman Sachs High Yield Online Savings, that can earn you over 16 times more than the national average APY on savings accounts.

Learn more about revolving vs. installment credit:

Information about the U.S. Bank Visa® Platinum Card has been collected independently by CNBC and has not been reviewed or provided by the issuer of the card prior to publication.

Information about the Marcus by Goldman Sachs High Yield Online Savings has been collected independently by CNBC and has not been reviewed or provided by the bank prior to publication. Goldman Sachs Bank USA is a Member FDIC.

Correction: Over the last decade revolving debt went to a peak of $1.10 trillion in February 2020. An earlier version misstated the figure.

Editorial Note: Opinions, analyses, reviews or recommendations expressed in this article are those of the CNBC Select editorial staff’s alone, and have not been reviewed, approved or otherwise endorsed by any third party.