In February, Consumer debt hit an all-time high of $4.82 trillion, according to a report from the Federal Reserve. This is because COVID-19 savings are spent and rising, interest rates, and ongoing inflation are eating household budgets.
Although credit card debt continued to increase in February, it grew slower than in earlier months of recovery. Credit card debt increased by 5% in February compared to the previous year, which is much slower than the 12.7% increase seen in January. This means the Fed's efforts to slow consumer spending by raising interest rates is working.
It appears that interest on old debt is driving some of the growing debt load since credit card interest rates have hit record highs. Additionally, more consumers are using credit cards and digital payments instead of cash, which is contributing to the rise in credit card debt.
Lower-income consumers are likely using credit cards to purchase essentials, like food and necessities. This group has already lost most of their savings during the pandemic and is facing high inflation and stagnant wage growth.
Consumers paid down a large amount of their credit card debt in 2020 during the pandemic. However, since 2021, there has been a “massive buildup" of consumer credit card debt. People are now taking trips they had postponed during the pandemic, combined with record-high inflation, which is driving up the cost of goods and services.
If you're struggling with credit card debt or other types of debt, debt settlement and bankruptcy may be options to consider. It is important to seek the advice of Florida Consumer Lawyers before making any decisions.