Credit card debt poised to a hit a new record high | FOX Business
Americans are in a growing financial predicament as credit card debt reaches alarming levels due to persistent inflation and soaring interest rates. According to the New York Federal Reserve Bank’s upcoming report, credit card debt is set to hit a new record, surpassing the previous high of $1.08 trillion during the last quarter of the year. This marks a significant shift from just a few years ago when households diligently paid off credit card debt with the help of stimulus payments during the COVID-19 pandemic.
The ongoing inflation crisis is a primary driver behind the surge in credit card usage. As the cost of everyday necessities continues to rise, many people turn to credit cards as an emergency fund. While inflation has decreased from its peak in 2022, it remains well above the Federal Reserve’s target of 2%, with prices up by a staggering 17.6% since January 2021. Essential expenses like food, rent, and energy have dramatically increased, further squeezing household budgets.
What makes this situation even more concerning is the current high-interest rates on credit cards, with the average annual percentage rate (APR) standing at 20.74%, the highest in decades. This means that carrying debt to cope with rising prices could result in individuals paying substantially more in the long run. For instance, an average American carrying $5,000 in debt could take nearly 280 months and accrue $8,124 in interest to pay off the debt at minimum payments.
In light of this concerning financial landscape, individuals must explore various strategies to manage their credit card debt effectively, such as negotiating for a lower APR, considering 0% balance transfer cards, reevaluating their budget, and improving their credit score………..
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Rising Dough
Given the intricate connections between consumer spending, credit card debt, and inflation, how might these economic factors impact individuals’ and businesses’ choices and financial well-being in the coming years?
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These economic factors may impact consumers and businesses choices by demonstrating the US economy in the face of higher inflation and rising interest rate as is largely attributable to solid consumer spending. Many businesses and consumers are paying a high interest rate because of the rise inflation today.