Americans are racking up credit card debt as inflation grows
Getty Images
maylen
(NewsNation) — In the face of rising inflation, many Americans are leaning on credit cards to bridge the gap between rising prices and incomes that can’t keep up.
The national household debt has jumped to $16.5 trillion over the past 12 months, according to a NerdWallet study. That’s a 7.65% increase over the previous year. The study found the average household had more than $165,000 in debt.
Mortgages, car loans and student loan debt counted for a big chunk of that figure, with an average household owing $222,000 in mortgage debt, $29,000 in car loans and $58,000 in student loan.
Credit card debt is also adding to what Americans owe, with borrowing rising by nearly $28 billion in November. Outstanding credit grew at a rate of 7.1%, with fewer Americans paying off their credit card in full each month.
American’s savings have dropped at the same time credit usage has gone up. Interest rates have also risen, and credit card interest rates could hit $20 if the Federal Reserve continues to hike rates in a bid to combat inflation.
For many Americans, credit cards aren’t being used for luxury items but day-to-day expenses or emergencies. Consumers also may be unaware of how much interest rates are rising, since the increase on a minimum payment may not be as noticeable. But over time, that interest can add up and extend how long it will take to pay off debt.
There are ways to reduce credit debt, even if you can’t pay off your entire balance immediately.
Experts recommend starting out by calling your credit card companies and asking for a reduction on your interest rate, especially if you’ve had the account for a long time or have extenuating circumstances like a recent loss of income.
Another option is to get a new card with a 0% balance transfer rate and consolidate your debt where it won’t continue to accrue interest. But those cards come with some strings attached, including possible transfer or annual fees and a limited time with 0% interest. If the balance isn’t paid off by the time that ends, interest will start adding up again.
