With credit card balances soaring to $1.08 trillion, Americans might have to rethink their increasing reliance on plastic money.
One analyst at Bankrate has warned there are signs of trouble amid the credit card blitz.
“Over the past two years, Americans’ credit card balances have skyrocketed 40%,” Ted Rossman, senior industry analyst at Bankrate, told CNBC.
“While Americans are managing their credit card debt pretty well, all things considered, we are seeing pockets of trouble at the household level,” he said.
More cardholders are carrying debt month to month, and fewer can pay their balances in full, a report by Bankrate.com says.
According to Bankrate, 49% of credit card holders carry debt from month to month on at least one card, up from 46% last year — and 56 million cardholders have been in debt for at least a year.
“The current environment is tough,” Rossman told CNBC. “Although inflation has eased, there’s a cumulative effect there.”
In a blog post, the Federal Reserve Bank of New York blog wrote that rising card debt might be the result of “shifts in lending, overextension, or deeper economic distress associated with higher borrowing costs and price pressures.”
The average credit card rate is more than 20%, on average — an all-time high, the outlet reported — after rising at its steepest annual pace ever, in step with the Federal Reserve’s interest rate hike cycle.
“Most cardholders’ rates have risen five-and-a-quarter percentage points during that span as a result of the Fed’s rate hikes meant to combat inflation,” Rossman said. “It’s no wonder, then, that we’re seeing more people carrying more debt for longer periods of time.”
Even with the Fed suggesting there may be three interest rate cuts coming this year, credit card annual percentage rates aren’t likely to move much, CNBC reported.
“I don’t think that’s going to bring a lot of relief,” Rossman conceded.
Rossman told the outlet the first thing a borrower should do is acknowledge what they owe and the interest rate — and then start paying down the debt with a 0% balance transfer card.
The hitch is that if they don’t pay the balance off, remaining debt will have a higher APR applied — about 23%, in line with rates for new credit, CNBC reported.
Fran Beyer ✉
Fran Beyer is a writer with Newsmax and covers national politics.
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