Just as parents go all-in on back-to-school spending, and Americans pay the bills from their summer vacations, the Federal Reserve Bank of New York presented us with an eye-opening number: Americans now owe a record-high $1.14 trillion in credit card debt after the second quarter of 2024.
"The fact that credit card balances rose a couple of points in the second quarter is pretty typical," said Bankrate analyst Ted Rossman. What is significant, he said, is the 48% increase since the first quarter of 2021.
Bankrate also found more credit card users, 50%, are carrying debt from month to month. It found 60% of borrowers with debt have been in credit card debt for at least a year.
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"The fact that more people are carrying more expensive debt for longer periods of time, that's where we really see the impact of high inflation and high interest rates," Rossman said.
Economists predict the Federal Reserve will start to lower interest rates in September, but Rossman cautions that one cut won't provide immediate relief.
"Let's say the Fed cuts a half a point next month," he said, "then the average credit card rate goes from 20.7% to 20.2%. It's not much of a difference."
According to TransUnion, the average credit card debt per borrower is $6,218. Rossman hopes borrowers put more money toward credit card debt each month beyond the minimum payment.
"If you make minimum payments toward the average balance at the average rate, you're going to be in debt for 18 years," he said, "and you're going to end up paying about $9,300 in interest," based on that average amount of debt.
Assuming you don't add to the debt, "You don't want to dig the hole any deeper," Rossman said.
Consumers juggling multiple forms of debt can try a few things. Here are some tips from Bankrate:
- Prioritize credit card debt with the highest interest rate.
- Look for an interest-free balance transfer promotion.
- Take on a side hustle.
- Consider credit counseling from a reputable organization.
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