More Americans racking up credit card debt as inflation rages
New data from CreditCards.com reveals that 60% of credit card holders have not paid their balances for over a year now.
This is a major increase from 2021 when the rate was at only 10%.
According to creditcards.com, 40% of these Americans say they’ve had their credit card debt for at least two years, 28% for at least three years, and 19% for at least five years. An additional 8% said they don’t know how long they’ve been in credit card debt.
“Credit card debt is easy to get into and hard to get out of,” said Ted Rossman, a senior analyst at CreditCards.com. “High inflation and rising interest rates are making it even harder to break free.”
Americans have a record amount of credit card debt, with the average household owing $8,942, according to WalletHub.
For residents in certain states, the average amount of credit card debt is even higher.
Here are the 10 states with the highest average household credit card debt.
- Alaska: $11,277
- Hawai’i: $10,190
- Virginia: $9,176
- Maryland: $9,120
- Connecticut: $9,088
- New Jersey: $8,956
- Colorado: $8,906
- Georgia: $8,699
- Texas: $8,681
- Utah: $8,527
Almost 50% of credit card holders who have credit card debt stated that needing to cover emergency and unexpected expenses is the primary reason for their credit card debt.
More specifically, 11% said it was to cover emergency or unexpected medical bills, 10% for home repairs and 10% for car repairs
16% said their debt was due to some other emergency or unexpected expense.
Inflation soared 8.3%, hovering near the fastest pace since 1981.
The annual inflation rate for the United States is 8.3% for the 12 months ended August 2022 after rising 8.5% previously, according to U.S. Labor Department data published Sept. 13.
Mark your calendars – The next inflation update is scheduled for release on Oct. 13 at 8:30 a.m. ET.
As of June 2022, Americans owed $887 billion in credit card debt according to data from the Federal Reserve Bank of New York.
This is a 5.5% increase compared to Q1 and a 13% increase in one year.
“Americans are borrowing more, but a big part of the increased borrowing is attributable to higher prices,” researchers for the New York Fed said in a news release.
The Federal Reserve is raising interest rates, and they don’t plan on stopping any time soon. Policymakers have approved four consecutive hikes, including two major ones.
There is an inverse relationship between interest rates and bonds.
Most economists expect unemployment to rise in conjunction with the benchmark interest rate.
If people lose their jobs, it’s going to be a big problem..
About 45% of all cardholders, and 53% of cardholders carrying debt, said that losing their job would have a “major impact” on their ability to make at least minimum credit card payments over the next year.
It’s important to remember that the majority of Americans live paycheck to paycheck.
During an interview on 60 Minutes, President Biden was asked about the future of the American economy.
“The annual inflation rate Mr. President as you know, last Tuesday, the annual inflation rate came in at 8.3%, the stock market nose-dived, people are shocked by their grocery bills. What can you do better and faster?” asked Scott Pelley.
“Well, first of all, let’s put this in perspective. The inflation rate month to month is up by just an inch. Hardly at all.”
“You’re not arguing that 8.3% is good news?” Asked Pelley.
“No! I’m not saying it is good news. But it was 8.2 before!” Biden responded. “I can make it sound like all of a sudden, MY GOD, it went to 8.2%”
Scott Pelley interrupted the President mid-sentence to tell him that “the United States is facing the highest inflation rate in 40 years.”
“I got that! But guess where we are. We’re in the position for the last several months, it hasn’t spiked….it’s been barely…. it’s stayed basically even.”
What do you predict? Will inflation get any better?