America’s Credit Card Debt Passes $1 Trillion
Last month, America’s credit card balance was set to surpass $1 trillion with the average interest rate on a new credit card currently at 24 percent, which is the highest figure seen since the Reagan administration. According to the Federal Reserve, the nation’s credit card debt has reached $986 billion, which has risen by $250 billion in the last two years.
“The spending is really nonstop now,” said Jill Gonzalez, a senior analyst at personal finance website WalletHub, according to The Hill. “We once thought of putting things on our credit card as frivolous spending, or a big purchase, a TV. Now, because of inflation, people are putting actual necessities, food, housing, on their credit card.”
The average American household carries a record $10,000 in credit card debt, which would take until 2030 to pay off entirely by making $250 monthly payments, assuming the card is no longer being used. These households would end up spending a total of $20,318 to pay it off with 24 percent interest. “It’s hard to build wealth when you’re paying 20 percent interest every month,” said Ted Rossman, a senior industry analyst at Bankrate.com.
In 2021, card balances fell to less than $750 billion, down from about $850 billion at the start of 2020 as Americans received federal stimulus payments and focused on building savings and paying down debt. Credit card debt rose by $86 billion in the fourth quarter of last year, which is the largest increase recorded, as spending increased and the Federal Reserve began a campaign of interest rate hikes.
The average credit card interest rate is 20.92 percent, which rose from 16.65 percent just last spring. “We’ve been tracking credit card rates since 1985, and these rates are the highest we’ve ever seen,” Rossman said. “The minimum-payment math is pretty staggering.”
Credit card customers fall into two categories: those who pay off their balance each month and those who do not. However, the former group is dwindling; 46 percent of cardholders carry debt from month to month, up from 39 percent a year ago.
Although older Americans tend to owe more credit card debt, millennials and gen Z typically have more difficulty paying it down. Additionally, credit cards ranked among the top-three monthly expenses for both generations.