As inflation continues to soar and interest rates rise, more and more Americans are turning to credit cards to make ends meet. Despite the pandemic-era stimulus payments that temporarily helped to bolster household savings, those accounts have since dwindled and signs of a looming debt crisis among U.S. consumers are beginning to emerge.
Credit card balances are at an all-time high, annual percentage rates (APRs) are up, and more consumers are taking on debt than in 2021. The debt relief industry has already reported a surge in demand that began last summer as struggling consumers scrambled to stay afloat. However, the defaults have already begun to roll in, with Discover Financial Services CFO John Greene issuing a warning last week of a sharp uptick in delinquencies.
As credit card balances continue to climb, the default rate is expected to grow even higher in 2023, with the Federal Reserve Bank of New York recently reporting a 15% year-over-year increase in total credit card balances for the third quarter of 2022, the largest surge in more than 20 years.
A new report from CreditCards.com shows that nearly 3 out of 4 credit card debtors added to their balances over the past year, with nearly half taking on additional debt due to rising costs and 34% seeing their balances jump due to rising interest rates. According to Bankrate.com, there are also more people carrying debt from month to month, with 46% of credit card holders carrying debt, up from 39% a year ago.
As Ted Rossman, senior industry analyst at Bankrate, notes, "Especially for people with lower incomes, it's easy to see how everyday essentials can overwhelm a paycheck with everything from rent to groceries, gas and more costing so much. It can be a vicious cycle, too, because most households don't have enough emergency savings."
"Financial experts" will advise you to to tighten your belt and come up with a strategy to pay off your credit cards, but the reality is that this type of corporate propaganda doesn't work for everyday working people. If you are struggling with credit card debt then a you owe it to yourself to learn more about Chapter 7 Bankruptcy. The reality is that bankruptcy is the best option for most consumers. At the very least, speak to Florida Consumer Lawyer about a possible bankruptcy, get your questions answered, and truly find out whether bankruptcy is best for you and your family.