The statistics surrounding credit card debt in America are alarming. According to the Federal Reserve Bank of New York, Americans collectively owe a staggering $1.14 trillion on their credit cards. This figure represents a significant increase, with the average balance per consumer now standing at $6,329 – up 4.8% year over year, as reported by TransUnion. Not only are credit card balances increasing, but delinquency rates are also on the rise, with roughly 9.1% of credit card balances transitioning into delinquency over the last year.
It is worth noting that credit card balances briefly declined in 2020 and early 2021 due to pandemic-related factors such as government stimulus checks and reduced spending opportunities. However, since early 2021, credit card balances have surged by 48%. This uptick can be attributed to a post-pandemic boom in services spending, coupled with high inflation and interest rates. Consumers have shown a willingness to splurge on travel and entertainment in an attempt to make up for lost experiences during the Covid years.
Credit cards are one of the most expensive ways to borrow money, with the average credit card charging more than 20% – near an all-time high. This high interest rate, coupled with record high credit card balances, poses a significant financial burden on consumers. It is imperative for individuals to prioritize paying down their credit card debt as soon as possible to avoid accruing additional interest charges.
According to Ted Rossman, a senior industry analyst at Bankrate, individuals carrying a balance on their credit cards should consider consolidating their debt or taking advantage of lower interest personal loans. Alternatively, transitioning to an interest-free balance transfer credit card can help individuals reduce their interest payments and pay off their debt more efficiently. It is crucial for consumers to explore these options and take proactive steps towards managing their credit card debt.
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