What would happen if everyone paid off their credit card debt at once?

Everyone getting out of debt on the same day.


Would the economy collapse?


What would happen to banks and other lenders?

What would happen if everyone paid off their credit card debt at once?
Yes. The economy would collapse. The reduction in spending because the money is going to reduce debt would reduce economic activity. It would also reduce the money supply. (To see how loans create money see any textbook on Money and Banking. It's worth a chapter.)
Reply:The banks would not want that, they make their money on keeping us in debt.
Reply:it's like the movie the day the earth stood still it would stood stand still
Reply:No.


The banks would be drowning in money...


Imagine all the funds flowing in when everyone sends them a check!


However, unless people start taking out loans, the banks will no longer make money on interest charges. (They will survive on all the outstanding loans though).


Now, if everyone decides to withdraw all their money from banks on the same day... that could be a problem!


Fortunately, the FDIC regulations would prevent a run on the bank, so the situation that occurred during the Great Depression won't happen again.
Reply:it would be a huge benefit to consumers but lenders would loose a lot of money that would ordinarily be made from the astronomical interest rates. Long term--- a few years--- the GDP would expand at a faster rate yielding a higher per capita GDP and thus a higher standard of living per person.
Reply:This will never happen. If it did, interest rates would plummet, making new credit more attractive, so everyone would just go into debt again.





Banks and lenders would be flush with cash, which just allows them to lend more money, due to the multiplier effect.





The economy would be strong, because savings rates would be higher, causing the dollar to increase against other world currencies. This would improve the trade imbalance and make imports less costly for Americans.





Anyway, enjoy your fantasy, because this will never happen en masse.
Reply:Not much.





Someone would quickly rack up some debt though
Reply:The second coming of Jesus!