A survey revealed that more consumers in the US are struggling to pay off their credit-card debts due to rising interest rates and high inflation.
The number of people who have been struggling to pay off their credit-card debts has increased over the past year. According to a report by CreditCards.com, the percentage of people who have been in debt for more than a year has risen to 60%.
Due to the rising cost of living, more households have turned to credit-card debt to cover their daily expenses. The report also noted that those in the lowest income bracket are more likely to carry a balance for emergencies such as child care and groceries.
Although the total credit-card balances have remained relatively lower compared to before the pandemic, many households are struggling with the effects of high inflation.
According to a survey, a quarter of respondents cited day-to-day expenses as the main reason they carry a credit-card balance. Almost half of the respondents cited unexpected expenses such as car repairs or medical bills.
The Federal Reserve is expected to raise interest rates next week for the fifth time this year. This increase could lead to higher delinquencies as credit-card rates are tied to the Fed Funds rate.
The figures released by the Federal Reserve are for credit-card debt, auto loans, and student loans, but not mortgage debt. During the pandemic, the restrictions on business and activity caused a decline in the availability of credit, but it has since returned to a record high.