As interest rates reach historic highs, Americans are struggling with a growing pile of credit card debt. A new survey from Bankrate, the consumer finance company, found that 46% of cardholders are carrying credit card balances from month to month, up from 39% a year ago. The personal finance company, NerdWallet, found that the average U.S. household is carrying $7,486 in credit card debt, a 29% increase from a year earlier. A third poll, from the personal finance website GOBankingRates, found that 14 million Americans owe more than $10,000 in credit card debt.
These rising card balances come at a time when consumers may find it harder than ever to pay them down. Credit card interest rates hit 20% in late 2022, according to the Federal Reserve, the highest level in nearly 30 years of tracking.
The recent rise in credit card debt is less about impulse buying and more about survival. American wages are rising, but consumer prices are rising faster. Simply put, stuff costs more. A December survey by U.S. News & World Report asked consumers to give the main reason for their credit card debt. The most common response was "increased costs coupled with insufficient income." Large numbers of respondents cited unexpected expenses, medical emergencies, job loss and car repair. Only one-tenth of those with credit card debt blamed their balances on frivolous spending.
As a result of these economic pressures, Americans are increasingly turning to credit cards to make ends meet. America's credit card customers fall into two camps. One group, large but shrinking, pays off its card balance every month. The other group, smaller but growing, carries credit card debt from one month to the next. At current interest rates, a five-figure credit card balance can cripple a household budget.
As the Federal Reserve raises interest rates in an effort to tamp down inflation, credit card rates are also on the rise. This can make it even harder for those struggling with credit card debt to pay it off.
In conclusion, the rising credit card debt among Americans is a reflection of the economic pressures facing households. As the costs of necessities such as groceries, gas, and utilities increase, many Americans are turning to credit cards to make ends meet. However, with interest rates at historic highs, paying off this debt is becoming increasingly difficult.