It is no longer news that consumer credit card debt is currently on the rise. Due to an increase in interest rates, credit card owners are now faced with higher prices that are difficult to balance. According to data from the Federal Reserve Bank of New York, consumers’ credit card balances had risen to a staggering $841 billion in just the first three months of 2022.
According to the New York Fed researchers, there’s a high possibility that this balance will continue increasing as the year runs out. In fact, a senior industry analyst at CreditCards.com, Ted Rossman says, “There’s a good chance that Americans’ total credit card balances will soon reach a new record high, marking a sharp reversal from the precipitous drop that occurred in 2020 and early 2021.” There’s information that over 220 million new credit card accounts have been opened in the first quarter of the year already.
While this doesn’t come as surprising information, the New York Fed researchers stated that thousands of accounts were also closed during the pandemic. The most common factors that have been perceived to contribute to this rising credit card debt include the rise in borrowing, auto loans, and student debts. Other noticeable factors include mortgages, high consumer spending, and propelled household debts.
Even after consumers had paid $83 billion in credit card debts during the pandemic, there’s still a steadily growing increase in these debts. Thanks to inflation and the high prices of necessities like gas, housing, and food, consumers are finding themselves in more debt, especially since the mass migration from the use of cash. Also, since the credit card rates are continually increasing to tap down inflation, according to the Federal Reserve, it is almost unavoidable to witness an increase in the amount of debt these credit card users are incurring with every passing day.
According to reports, the country’s APRs are currently over 16% and are predicted to be well over 18% before the end of the year. This increase would be an all-time record. Matt Schulz, a chief credit analyst for LendingTree, says that “With rampant inflation and rising interest rates, things are going to get worse before they get better.” He continues by saying that “Consumers need to act now to knock down that credit card debt because it is only going to get more expensive — and in a hurry.”
As a credit card owner, you can reduce your credit card debt by negotiating with your card issuer for lower interest rates or switching to an interest-free balance transfer credit card. There’s also the option of seeking a debt consolidation loan to pay off high-interest credit card bets using this low-equity loan. You can also reduce your credit card debt by paying your balance on time and spending within your means. According to Holly O’Neil, president of retail banking at Bank of America, “Spending within your means will leave more money at the end of every month and help reduce your debt,”..…..”as an added bonus, spending less than your limit allows will also help you build a stronger credit score.”