COVID stimulus funds caused a drop in debt spending

Financial Health Network launched its tenth Expense reportshowing the first overall decline in spending on interest and fees.

The study tracks what US households spent on financial services during the pandemic and argues that the 4% decline in debt spending came from the student loan debt moratorium, government stimulus and a drop in credit card debt related to the pandemic.

Still, analysts said underserved populations pay a more significant share of fees, with spending likely to rise as pressures from the pandemic ease this year.

“The past two years of the pandemic have been a roller coaster ride for people financially, often forcing them to recalibrate their lives and finances with each new COVID development,” said Financial Health Network CEO, Jennifer Techer.

“While we have seen an unusual drop in overall financial services spending in 2021, the confluence of rising consumer spending, the end of government aid, and rising inflation all point to an increase in fees and interest for 2022; that will likely fall disproportionately on households that are already struggling financially.”

The decline in spending will not last

Analysis of year-over-year trends for more than two dozen financial products and services found an unusual decline in overall spending. However, an outsized cost burden remains for underserved populations, raising concerns with an anticipated increase in the coming year.

Total interest and fees decreased 4% to $305 billion from a high of $319 billion in 2020, primarily driven by changes in credit card and student loan spending. This year’s report found that households deemed “financially unhealthy” accounted for 83% of all fees and interest paid:

Product Total fees in B
Total in B
% change
Account Maintenance Fee $5.0 $4.8 -4%
ATM fees $2.0 $23 +15%
Cashing of checks, non-bank $1.6 $1.5 -3%
international remittances $8.5 $8.9 +5%
Payment orders $0.9 $0.9 +2%
Overdraft/NSF $11.4 $10.7 -6%
prepaid cards $6.2 $7.2 +17%
TOTAL $35.4 $36.4 +3%
Table provided by the Financial Health Network Study

Despite declines in overall spending, lower-advantaged households continued to trend toward higher-cost loans and higher-cost interest services.

Broken down by income, race, and ethnicity, the disparities become apparent. As a percentage of their income, black households, on average, spent 7% on fees, twice as much as white households spent on interest, 3%, while Latino families spent 5% or 40% more than white households.

Low-to-moderate income households spent 8% of their income on fees and interest, more than double the highest income brackets who paid 3%.

Expenditure differentiated by type of product: BNPL

After the BNPL rush that started in August, Financial Health Network experienced a significant increase in the BNPL market. By March 2022, consumers paid an estimated $1 billion in total interest in the popular payment in four or other BNPL options.

Comparatively, they estimated that households carry total balances of $95 billion in interest and fees on cards in 2021.

Financial Health Network found that BNPL users are disproportionately those struggling with their financial health.

Based on your March BNPL specific report, one in four BNPL users was financially vulnerable. The Financial Health Network Score describes vulnerable populations struggling with most or all aspects of their financial lives: Nearly a quarter report having difficulty making payments.

The study also found that younger generations, such as Generation Z, were looking for tech alternatives to credit cards: 20% of 18-25 year olds surveyed reported using BNPL in the past 12 months.


Overdraft and non-sufficient funds fees appear to have leveled off, totaling approximately $11 billion in 2020 and 2021. Recent announcements by analysts of overdraft reform by several major banks could lead to positive changes in this market in 2022 .

overdraft fees

Bank of America, for example, announced that it would lower its fee to $10 on May 1. Chase lowered his fee to $34, just shy of Wells Fargo and TD Bank’s $35 fees and PNC’s $36 fee.

Meanwhile, many digital banks have slashed fees altogether, including Ally, Axos, Chime, Monzo, and Revolut.

Financial Health Network found that black households with bank accounts were nearly twice as likely as white households to report having paid at least one overdraft fee, while Latino households were 1.5 times more likely.

Financially vulnerable households with bank accounts were about 10 times more likely to pay overdraft fees.

Bad news: credit card debt is back

The pandemic was heralded as a dramatic shift in US credit card debt, and the trend continued throughout 2021 until the last quarter, when repayments saw a record jump.

The WSJ found that from the shutdown in February 2020 through June of that year, credit debt fell 10% in the US, as customers stayed inside and saved.

Debt relief, pandemic stimulus, and deferred mortgage and student loans were used directly to pay off credit cards, declining in 2021 by 10%, but only for a time. Last quarter’s surprise showed a red flag for financial health, the Financial Health Network said, approaching pre-pandemic levels.

based on New York Fed Macroeconomic Data Center published in February 2022, it was the most significant increase in aggregate household debt since 2007.

“Aggregate credit card limits increased by $96 billion in the fourth quarter, and aggregate credit limits are now $160 billion above the pre-pandemic level,” the Fed study found. Aggregate limits on credit card accounts are now $4.06 trillion, compared to $3.93 trillion in the first quarter of 2020.”

student loans

Interest and fees on federal student loans fell sharply from an estimated $25 billion in 2019 to $6.3 billion in 2021 due to the March 2020 moratorium. Unfortunately for student borrowers, the moratorium ends August 31 of 2022.

Student loans suck

For every month the moratorium is extended, the study estimates that federal student loan borrowers avoid $1.5 billion in interest payments. Federal student loans comprise 92% of the total $1.7 trillion; private student loan borrowers paid 30% more interest and fees in 2021 than federal student loan borrowers.

The good news: Pawn, payday and title loans are down

Financial Health Network found that interest and fees on alternative financial services fell dramatically between 2019 and 2021: pawn income fell 25%, payday fell 45%, and title loans sank nearly 40% .

Payday loans, in particular, saw significant declines over the past year, with the percentage of households reporting usage falling from 5% in 2020 to 3% in 2021.

Black households, low-to-moderate income households, and financially vulnerable households reported significant drops in payday loan use.

“One of the reasons we’re collaborating with the Financial Health Network is to further assess how households managed their finances during the pandemic,” said Sarah Keh, vice president of inclusive solutions at Prudential.

“Access to high-quality, affordable financial services, especially across race, ethnicity, and income, provides data for researchers, policymakers, and advocates to track trends and identify opportunities to support more equitable financial health policies and products.”

Year under review

As 2021 drew to a close, spending on various products returned to the pre-pandemic average. Credit card balances fell sharply, but recovered just in time for holiday spending. Installment loan balances also grew in the second half of 2021, as did overdraft fees.

The report found that; “If household spending continues to grow, interest rates rise as expected, and remaining government supports end as projected, we anticipate 2022 will raise general interest and financial services fees. Financially distressed households will likely feel these impacts most acutely.”


It’s the decade of the spending report, but the second under a new methodology that combines research with a nationally representative survey of consumer spending. The survey of more than 5,000 adults in the US was conducted in November 2021.

In closing, the Financial Health Network said that in 2022 it will work on summaries that “take a closer look at products with particular implications for policymakers, financial service providers and financial health in general.”

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